Is buying a home this year one of your resolutions? For most, this is life’s largest purchase. It requires much planning, and it can be overwhelming, especially if it’s your first home. I’m here to tell you that there is no need for that trepidation.
Most people start their home search by surfing sites such as Realtor.com, Zillow, and Trulia. That’s understandable—however your real first step should be to hire a Realtor to represent you.
Searching online at these sites takes a lot of time. A Realtor can set up an automatic search via the MLS (multiple listing service) for you, allowing you to receive emails about new properties, or price reductions which put a property in your budget. This is a HUGE time saver when looking to buy a home. And, in a market like Nashville, where great properties sell in a matter of days, getting in to see a property within a day or two of it going on the market can be an enormous advantage.
So, how do you pick a Realtor? You need to find someone who is not only great at his or her job, but someone you like, as you’re going to be spending a lot of time together. Get together: have coffee and chat. See if you click. Determine whether that person has the experience, customer service, and understanding of the market that you’re looking for.
Notice how quickly the Realtor responds to your initial phone call or email. If it’s not within 24 hours, that’s a bad sign. This business moves fast and deals can be lost if your Realtor doesn’t respond quickly on your behalf during negotiations.
Be prepared to sign a buyer’s representation agreement. Legally, before you disclose confidential information to your Realtor, you should have a signed buyer representation agreement. That helps to ensure that your Realtor will keep your private information confidential, among other things.
Once you’ve found a Realtor, step two is to get preapproved by a mortgage lender. This allows you to understand how much you can comfortably afford to spend on a home, your monthly payment, interest rates you qualify for, loan options, and the like, and to put an offer on a home.
A good mortgage lender is crucial to ensuring a smooth transaction. A bad lender can make the process difficult for everyone involved, put your closing in jeopardy, or leave you paying a higher interest rate than you should have. That’s why it’s important to work with the best.
Paperwork To Gather
Each lender has slightly different documentation requirements for the preapproval process, but, in general, expect to provide documents such as:
- A completed application (lender will provide this)
- Recent pay stubs (past 30 days), W2’s (past two years), Tax Returns (past two years), and statements for assets on the application (two most recent months, or quarterly statement from checking, savings, 401k, mutual funds, individual stock accounts, IRA’s, etc.)
- Corporate Tax Returns (if you are self-employed and own more than 25% of the company)
Getting a Preapproval Letter
Upon application, you should usually receive a pre-approval letter in 2-3 business days. The lender may ask for additional documentation. Since the housing bubble burst in 2008, underwriters have become much stricter in the loan approval process.
In addition to a preapproval letter showing the amount you can afford to spend when buying a home, ask your lender to show you the monthly payment for that amount, inclusive of taxes, insurance, and mortgage insurance. Make sure you are comfortable with the payment required for the amount in the preapproval letter. Once you have received your preapproval letter, forward it to your Realtor for your file, so when we are ready to submit an offer it will be available.
Ask About Free Money
Tennessee, in addition to some banks, offer free money for homebuyers under certain conditions (based on income, credit score, etc., or funds for specific neighborhoods). If any of these programs interest you, talk to your lender to see if you qualify.
Get a Loan Estimate & Understand Closing Costs
In addition, mortgage lenders will provide you with a loan estimate, which will provide an estimate of the closing costs you’ll need to pay on top of your down payment and show exactly what fees the mortgage company is charging.
Make sure you understand the fees. Generally, we estimate closing costs to be approximately 2.5% of the purchase price of the property. Your mortgage lender can provide you with more detailed estimates based on your exact preapproval price. Remember, these closing costs are due at closing.
A good Realtor and a good Lender will help with the many steps in the process of buying a home. One of my favorite activities is helping my clients build wealth through buying real estate, no matter how large or small. It is an investment that, over time, will provide you not only a place of your own, but also equity growth.
With the help of the professionals you employ, you can work towards your 2019 goal of home ownership. For more information, please contact me or any of the trusted advisors you already know.
Emily Benedict is a Realtor working with buyers, sellers, investors, and developers throughout Middle Tennessee.
For more home relate stories, see: Searching for the perfect home in East Nashville