FIND YOUR DREAM HOME
How to Choose a Home Here are some tips to help determine which house is best for you.
Once you have decided what neighborhoods you like for your home search, it’s time to pick out a few homes to view. Knowing good house features keeps you focused on which ones are most important to you.
When narrowing down your home search, consider the following:
- know what types of home
- determine what age and condition
- consider resale potential
- use a features wish list to keep focused
- act decisively when you find the right home
Determine What Type of Home You Want to Buy
There are several forms of home ownership: single-family homes, multiple-family homes, condominiums and co-ops.
Single-family homes: One home per lot.
Multiple-family homes: Some buyers, particularly first-timers, start with multiple-family dwellings, so they’ll have rental income to help with their costs. Many mortgage plans, including VA and FHA loans, can be used for buildings with up to four units, if the buyer intends to occupy one of them.
Condominiums: With a condo, you own “from the plaster in.” You also own a certain percentage of the “common elements” – staircases, sidewalks, roofs, etc. Monthly charges pay your share of taxes and insurance on those elements, as well as repairs and maintenance. A homeowner’s association administers the development.
Co-ops: In some cities, cooperative apartments are common. With co-ops, you purchase shares in a corporation that owns the whole building, and you receive a lease to your own unit. A board of directors, comprised of owners and elected by owners, supervises the building management. Monthly charges include your share of an overall mortgage on the building. Co-ops are not considered real property. In addition to the loan payments, which are made to the lender, co-op residents are responsible for paying a pro-rata share of the costs of running and maintaining the building.
Decide What Age and Condition of Home You Want to Purchase
Weigh your needs, budget and personal tastes in deciding whether you want to buy a newly constructed home, an older home or a “fixer-upper” that requires some work.
Consider Resale Potential
As you look at homes, you may want to keep in mind these resale considerations.
- One-bedroom condos are more difficult to resell than two-bedroom condos.
- Two-bedroom/one-bath single houses generally have less appeal than houses with three or more bedrooms, and therefore have less appreciation potential.
- Homes with “curb appeal,” i.e., well-maintained, attractive and with a charming appearance from the street, are the easiest to resell.
- The most expensive houses on the street, or ones with anything unusual or unique are not suited for resale. The best investment potential is traditionally found in a less expensive, more moderately sized home.
Use a Features Wish List to Keep Your Search Focused
Make a features wish list to clarify which features are most and least important to you when looking for a home. Using this features wish list will keep your house hunt focused and effective.
Use a Home Comparison Chart to Keep Your Observations Organized
While house hunting, it’s a good idea to make notes about what you see because viewing several houses at a time can be confusing. Use a home comparison chart to help you keep track of your search, organize your thoughts and record your impressions.
Act Decisively When You Find the Right Home
Before you begin the home buying process, resolve to act promptly when you do find the right house. Every REALTOR® has stories to tell about a couple who looked far and wide for their dream home, finally found it, and then said, “We always promised my Dad wéd sleep on it, so wéll make an offer tomorrow.” Many times the story had a sad ending – someone else came in that evening with an offer that was accepted.
Resolve that you will act decisively when you find the house that’s clearly right for you. This is particularly important after a long search or if the house is newly listed and/or underpriced.
WHAT TO EXPECT FROM THE MORTGAGE PROCESS:
A pre-approval is an application for credit and a lender’s written commitment (subject to verification) of how much they’ll let you borrow, letting you know how much home you can afford. This occurs before a loan application is completed[Cg1] [Cg2] [Cg3] [Cg4] . Pre-approval requires more information than a pre-qualification application, such as the property purchase price and down payment amount. Getting pre-approved can help show home sellers you are a serious buyer.
The mortgage loan application form asks for detailed information about you and the property you wish to buy, and requires documentation about your personal finances. The lender will examine this information, as well as your credit history.
Locking in a Rate
Mortgage loan rates may change daily. To ensure that you receive the rate you were quoted, you may elect to lock in your rate by paying an up-front authorization fee.
A borrower can pay points, a dollar amount based on a percentage of the loan amount, to the lender to reduce the interest rate on the loan. This requires additional costs up front, but you may realize savings in the long run by paying less interest. Speak with a mortgage advisor to see if purchasing points is an option for you.
Your property will be appraised to determine its value. The appraiser will visit the house and will also consider sale prices of comparable houses.
Typically, lenders prefer that a borrower have 20% of the purchase price for the down payment. If you make a down payment of less than 20%, you generally have to purchase Private Mortgage Insurance (PMI). PMI protects the lender if you default on the loan, and is part of your monthly mortgage loan payment.
Loan Review Process
After the appraisal, the loan file is submitted to the lender for your loan to be reviewed.
Escrow and Title Preparation
A title company will hold the money and documents until all conditions of the mortgage approval are met. Title work will be prepared, including a title exam to ensure the title to the property is clear. Other documents such as the mortgage note and deed will be prepared.
The costs associated with processing and closing a loan, such as application fees, points, title, insurance, and credit processing. Your lender should provide you with a “Good Faith Estimate,” advising you of the estimated costs you may have to pay at loan closing. When budgeting for your new home purchase, be sure to factor in closing costs.
The documents will be sent to a title company for you and the seller to sign. Funds such as any remaining down payment and closing costs will be due at this time. Closing costs normally include such items as appraisal fees, title exam, settlement fees, title insurance, credit report fees, and application fees.
When all funds are collected and the contract has been verified, the title is transferred and the purchase price funds are disbursed to the seller. After this step, you can take over the keys to your new home – congratulations!