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Buyers Guide

Before we begin:

It’s important to know how much you can comfortably spend and be able to

back that up with verification from a bank or lender. In addition to that, buyers

must also work with a real estate attorney to assist with the contract and closing

processes of a home purchase as there can be many moving parts during a

negotiation. Nest Lux agents will work with the most experienced attorneys and

lenders in the business to ensure that our clients feel protected in their

investments.

Tips for home buyers:

BUILD YOUR TEAM: To buy a house, you should first team up with a

trustworthy real estate agent and make sure your credit is in good shape. A

home is a huge purchase, so you'll want to make sure you're making as few

mistakes as possible along the way. That means putting together a team of

people you trust, including a real estate agent, lender, and lawyer, which is

often the bank's attorney, says Bull.

DETERMINE YOUR PRICE POINT: In most cases if you plan to get a

mortgage, you need a loan pre-approval in hand before you can start

looking at houses. You can do this yourself using a mortgage calculator on

sites like Zillow or Trulia (just be sure to include property taxes and

insurance in that estimate), or you can ask a lender to pre-qualify you for a

loan. The general rule of thumb is to spend less than 30% of your

take-home pay on total monthly housing expenses. But figuring out how

much you can realistically afford will come down to your debt-to-income

ratio. Chedid recommends your monthly debts, including your housing

costs, not equal more than 40% to 45% of your gross monthly income.

GET PRE-APPROVED FOR A LOAN: Once you find "the one" and make an

offer, you'll need to sign a purchase and sale agreement and get an

inspection of the home before officially applying for a mortgage. In most

cases, if you plan to get a mortgage, you need a loan pre-approval in hand

before you can start looking at houses — most realtors won't entertain

shoppers who don't have one. Bull calls it getting your "financing ducks in

a row." While you may already have an idea of what you can afford, you'll

need to find out how the bank sees you. A mortgage broker will assess

your income, assets, and credit to determine your maximum loan amount.

Loudenback, Tanza. "How to Buy a House, from Mortgage Pre-approval to Closing." Business Insider. June 09, 2020. Accessed August 27, 2021.https://www.businessinsider.com/personal-finance/how-to-buy-a-house-step-by-step-guide.

Fontinelle, Amy. "The Complete Homebuying Guide." Investopedia. July 29, 2021. Accessed August 27, 2021.https://www.investopedia.com/homebuying-guide-4776300.

http://www.businessinsider.com/how-to-find-the-perfect-real-estate-agent-2017-5

http://www.businessinsider.com/homebuying-advice-you-cant-afford-to-ignore-2017-3/#-2

https://www.businessinsider.com/how-to-calculate-debt-to-income-ratio

https://www.businessinsider.com/how-to-calculate-debt-to-income-ratio

https://www.businessinsider.com/personal-finance/mortgage-rates-volatile-buying-a-home

https://www.businessinsider.com/what-is-a-good-credit-score-to-buy-a-house

During pre-approval, the lender will also do a hard inquiry of your credit,

which will show up on your credit report. Once you're pre-approved, you'll

receive a conditional letter stating the amount you've been approved for.

It's worth noting that you don't have to go with the lender that offered you

pre-approval. You can use your pre-approval to shop around for lenders

who will offer you better rates. "The rate is important, but so is the service

and making sure you get to the closing table," says Bull.

CALCULATE EXACTLY HOW MUCH YOU CAN AFFORD: Now you can find

out how much house you can realistically afford given your loan amount.

Don't forget to factor in taxes, homeowners insurance, closing costs,

private mortgage insurance (PMI), and homeowner's association fees, if

you expect to have them.

SHOP FOR HOMES: Though your real estate agent should be your top

resource, "do your homework," Bull says. Find out which neighborhoods

you want to be in and check out a few open houses. The more you see, the

more informed your decision will be when you finally pick "the one." You'll

need to stay on your toes while you're shopping. New homes come on the

market every day, so it's imperative to stay on top of listings, whether that

means signing up for online alerts or checking in with your realtor daily. Bull

also suggests making it a priority to see homes the day they hit the

market, or the first available showing, and always be ready to sign an offer.

You may even want to keep your lender "waiting in the wings," she says, so

that you can get an updated pre-approval letter quickly.



https://www.businessinsider.com/what-is-a-hard-inquiry-credit-report

MAKE AN OFFER: Once you've found the home of your dreams, it's time to

make an offer. The seller may flat out reject your offer, counter your offer, or

accept it. If they counter, you may accept their counter, or you can counter

their counter offer. Your real estate agent will want to know your top

budget beforehand and will negotiate on your behalf. Bull said the most

desirable offers come from cash buyers who don't have any contingencies,

because those deals can close within a week. But most people do have

financing contingencies, meaning they're required to work with the bank

to secure a loan, which can extend the closing process to up to 45 days.

Once your offer is accepted by the seller, a contract for sale and deposit

paid to the listing agent will bind the offer.

REVIEW AND SIGN THE PURCHASE AND SALE AGREEMENT: At the

signing of the purchase and sale agreement, the buyer will also need to

provide an additional deposit — typically 5% of the down payment price

(minus the deposit already put down). The purchase and sale agreement

also lays out several dates for when things will take place, including the

inspection and appraisal, and the financing deadline, which will require

the remainder of the down payment. As the buyer, it's your attorney's job

to make sure the transaction is successful. They will review the terms of the

purchase and sale agreement and get back to the seller's attorney about

re-negotiating any of the terms. The purchase and sale agreement will

state the final price and all other terms of the offer. The sale is only final if

all terms are met. The attorney will also do a title search on the property to

ensure there are no liens from the previous owner, like defaulting on their

mortgage, for example.



GET AN INSPECTION: Typically a purchase and sale will include an

inspection contingency. An inspector will make sure the buyer is

purchasing the property in the condition stated in the offer. It's paid for by

the buyer and usually costs anywhere between $300 and $600,

depending on the size of the home. If problems turn up, the buyer can

re-negotiate with the seller to pay for any repairs or lower the price, or

even back out of the deal completely without losing the deposit.

APPLY FOR YOUR MORTGAGE: The lender should be keeping tabs on

interest rates because they fluctuate daily. It's usually locked right after the

purchase and sale agreement, but if the rates drop significantly, it can be

relocked. You can choose either a fixed-rate mortgage or an

adjustable-rate mortgage (ARM). The key difference between the two is

that with a fixed-rate, you will lock in one mortgage rate for the life of the

loan, either 15 or 30 years. Your monthly mortgage payment will remain the

same until you pay back the loan, unless you refinance. With an ARM, your

monthly mortgage payments will be the same for a set period of time —

usually anywhere from three to 10 years — and then change annually

thereafter based on the current market rate. This will typically give you a

lower initial interest rate, but won't guarantee predictable payments for

the life of the loan. Your lender will be able to help you choose the loan

that's best for your situation.

GET AN APPRAISAL: If you're taking out a home loan to finance the

purchase, the bank will want to ensure the price is an "appropriate deal,"

says Bull, so they'll send a third party appraiser to analyze the property and

pull neighborhood comps to determine the property's value. If the bank

doesn't think the property is worth what the offer states, they may

re-negotiate with the seller. If the seller doesn't budge, then the buyer may

have to come up with the difference in cash.



https://www.businessinsider.com/fixed-rate-mortgage-vs-adjustable-rate-mortgage

https://www.businessinsider.com/fixed-rate-mortgage-vs-adjustable-rate-mortgage

https://www.businessinsider.com/how-to-calculate-mortgage-payment

PURCHASE HOMEOWNER’S INSURANCE FOR THE PROPERTY: If the

property is being financed, you will need to purchase homeowner's

insurance before closing. This is not required if you're buying a condo or

townhouse where the homeowner's insurance is covered in the association

fee.

DO A FINAL WALK-THROUGH: Once the mortgage is obtained, the

lawyers will set a date for a final walkthrough and a closing. The final

walkthrough usually takes place a day before the closing and it's a time

when the buyers can physically confirm that the house is in the condition

as agreed to in the contract, says Chedid.

CLOSE ON THE PROPERTY: On the day of the closing (also known as the

settlement) you will sign a lot of paperwork — more than 20 documents —

and the final funds will be distributed, Chedid says. It's a process that could

take up to two hours. "Once all the papers are signed, the buyer is now a

homeowner," Chedid says.



The Bottom Line

This brief overview should help put you on the path toward filling

in any gaps in your home buying knowledge. Remember that the

more you educate yourself about the process beforehand, the less

stressful it will be, and the more likely you will be to get the house

you want for a price you can afford.



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