Step 1Credit Score
Simply put, the better your credit score, the more attractive you’ll be to lenders. As such, a higher credit score will qualify you for an improved interest rate on your mortgage. A credit score in the low 700s or higher will translate to a favorable rate, though a score in the high 500s should still qualify you for approval. Obviously, a more favorable rate will translate to huge savings over the long run. You should obtain a credit report from a credit reporting agency to ensure that you have done everything possible to improve your score before allowing a lender to review your credit. Minimize any outstanding debt reported to the greatest extent possible. Federal law allows you to obtain a free credit report once a year from every credit reporting agency.
FREE CREDIT SCORE REPORT
Step 2How Much House Can You Afford?
Taking advantage of a free mortgage calculator will assist you early in the process to understand the price range of homes you’ll be able to afford. Mortgage calculators generate an estimate of monthly owed payments, so try inputting varied but realistic values for home price, down payment, loan term, and interest rate into the online calculator. It may also be useful to consider that many new homebuyers who anticipate income growth choose to financially grow into their mortgage over the course of several years.
MORTGAGE CALCULATOR
Step 3Mortgage Pre-approval
By now, you’ll have a general idea of how much house you can afford and what type of lending rate you’ll be eligible for based on your credit score. Obtaining mortgage pre-approval will remove any uncertainties as to where your financial wherewithal stands. Whereas pre-qualification provides an estimate of how much you can borrow, pre-approval means that you have been approved to borrow a specific amount by a lender who has reviewed your debt-to-income ratio and other essential documents of your financial portfolio. Sellers overwhelmingly prefer buyers who have been pre-approved, so you’ll jump to the front of line with a pre-approval letter in hand when your home search materializes. By obtaining pre-approval, you’ll also know more precisely how much you can borrow, for what monthly payment you’ll be responsible, and what your specific loan interest rate will be. Many home buyers find it useful to contact several lenders to find the most favorable result within several weeks as this application may affect your credit score. It’s also important to remember that this application will not lock you into a loan with a specific lender but will nevertheless serve you well throughout the remainder of the home buying process.
FIND A PUGET SOUND MORTGAGE BROKER
Step 4Buyer’s Agent
Fortunately, sellers pay the realtor commission on the sale, but you will be responsible for a representation fee. There are many advantages throughout the remainder of the process to enlisting an agent on your team that make the representation fee well worth the cost. To begin, a buyer’s agent will assist you in refining what factors are important to you in your target home. Once you have refined your search characteristics, your agent will reach out to buyers with the right fit, thereby saving you time. As you discuss the pros and cons of potential fits, your agent will further save you time and energy by facilitating appointments to visit homes and meet with listing agents. When it’s time to begin negotiating a price, buyer’s agents help to recommend an effective initial offer while considering local home value trends, market demand and the state of the local housing landscape. Your agent will stay on top of due dates, paperwork, and other details to make the process go smoothly. Then, when you settle on your dream home, your agent will use negotiation skills and knowledge of home purchase terminology to advocate for a favorable price and outcome related to repairs and other contingencies. Throughout the process, a buyer’s agent will also be able to utilize a referral network of inspectors and other professionals to streamline the purchase.
At Davis Property Management, our full-time agents are ideally suited to work with you in the greater Puget Sound Area. With local market expertise, legal knowledge, and savvy negotiating skills, our team of realtors have proven to achieve optimal prices and terms for clients.
FIND YOUR AGENT
Step 5Housing Search
Together with your agent, record what home characteristics and amenities emerge as your priorities to enable a focused search. When considering the type of home you’ll target, consider the number of bedrooms and bathrooms you desire with a thought to any future desire to expand your household. Square footage, backyard, architectural style, views, storage, and layout are other home-specific features you’ll want to discuss. When considering location and neighborhood, it’s helpful to think about work commutes, schools, zoning, area statistics, and other amenities such as parks, shopping, hiking trails and public transportation. Your agent will employ access to a vast network of currently available homes via the Multiple Listing Service (MLS) to identify potential fits. Flexibility with your parameters at this stage may allow your agent to suggest options within your budget that exceed your overall expectation. Using MLS access in combination with local expertise and market familiarity, your agent will send you listings, schedule showings, and keep you informed of open house viewings.
SEARCH FOR AVAILABLE PROPERTIES NOW
Step 6Home Visits
As exciting as it is to tour prospective homes, it’s important remain vigilant of the home’s condition so that you won’t be surprised by any potential challenges that could surface later in the process. Pay attention to any interior or exterior structural problems and feel free to test out kitchen amenities, water faucets, and lights to uncover any functional issues, like water pressure or electrical issues. Ask the listing agent about the heating and cooling retention of doors/windows as well as potential noise from neighbors and traffic. With noise and traffic in mind, it can be helpful to visit a prospective home at several different times of day to get a better idea of the activity level of the immediate neighborhood as well as of parking availability. As you continue to visit homes you’re interested in, your agent will help you to keep an eye on appraisal values of comparable homes in the neighborhood to ensure that you do not overpay.
CHECKLIST WHEN VIEWING A HOME
Step 7Making an Offer
Once you’ve settled on a target home, it’s time to make an initial offer. While the listing price of the home is relevant, your agent will help you to zero in on an initial offer that allows room for negotiation with the seller. Your price point will be informed by a Comparative Market Analysis (CMA) conducted by your agent to estimate the home’s market value based on comparable sales in the area with an eye to how long they sat on the market. In addition, your agent will request disclosures regarding any known problems with the house that could affect its value. Next, your agent will submit an offer on your behalf, giving the seller the opportunity to accept, deny or make a counteroffer. If your target home is in a hot market, expect there to be other interested buyers in which case you will want to lead with a high bid or make an offer above the asking price. You may also include an “earnest money” deposit in the offer, which represents a sum you are willing to sacrifice should you back out of the deal later to purchase a different home. However, if location demand is low or the house has been sitting on the market for an extended time, it can likely be purchased under the asking price. Similarly, unoccupied houses that are being flipped after a recent purchase and improvements can typically be bid down to a seller who is motivated to sell quickly. Placing a time limit on your offer may also encourage an expedited acceptance of your offer. As you progress towards a deal, a contingency agreement will be negotiated to determine what is required for the purchase to occur. Whereas an appraisal contingency is necessary, an inspection contingency is optional but highly recommended.
TIPS ON PUTTING IN AN OFFER
Step 8Home Inspection
Within a week of signing the Purchase and Sale Agreement, your agent will arrange for a home inspection that you and your agent are welcome to attend. This relatively inexpensive inspection will identify critical problems with the home not previously identified or agreed upon that may save you tens of thousands of dollars in the long run. The inspection report may include major issues related to health (e.g. mold, lead, pests, asbestos), safety (e.g. wiring), or other major non-cosmetic issues (e.g. unstable roofing, dry rot). Upon receipt of the report, discuss the findings with your agent to see if a renegotiation of your offer is advisable. If so, you can submit a new offer or request that the seller either fix the issues before closing or provide you with a stipend to do so later.
HOME INSPECTION CHECKLIST
Step 9Solidify Financing
Before you are cleared to close, you’ll need to officially apply for your mortgage loan. Even if you elect to apply with the lender who granted your pre-approval, they will look again at the essential documents of your financial portfolio to look for any significant changes. Assuming there are no major changes to your finances that would affect your purchase approval, the lender will move forward by hiring a home appraiser. After the appraisal is completed, a report will be made available to you and your agent detailing its findings and methodology for review. If the appraised is equal to or above your price, you will be cleared to close right away. If the appraised value comes in below your price, you’ll have several options to advance towards closing. If you question the validity of the report’s findings based on the comparative properties used, you can request that the lender conduct a second appraisal. Alternatively, if you accept the report’s findings as valid, you can either attempt to renegotiate the price with the seller or make up the discrepancy with a direct payment.
HOME APPRAISAL FAQ’S
Step 10Closing
Once you have obtained final mortgage approval, it’s time to prepare for closing day. Closing day occurs about a month after the contract with the seller is signed, giving you ample time to shop around for homeowners insurance, proof of which you will need to bring to closing day. Your sale contract typically allows for a walk-through 24-hours prior to closing day to ensure that the home is in expected condition and any repairs agreed upon after the home inspection have been completed. If any issues are discovered, they can be addressed on closing day. At the closing day meeting, your agent will help you handle an extensive amount of paperwork to review and sign. A title search will also occur to make sure no liens exist on the property. After signing paperwork and paying the down payment and closing costs, the keys will be yours!
UNDERSTANDING THE CLOSING PROCESS
