The real estate transaction is a difficult, strenuous and time-consuming mess but hopefully the below information and your real estate agent will help to clarify the process and some of the jargon.
Over the next few weeks, I’ll be updating my blog a few steps at a time so as not to overwhelm you. And as you may have guessed, the home buying process is different from state to state so in this series we’re focusing on North Carolina, even more specifically with buying homes for sale in Charlotte. Let’s dive in…
Step 1 – Financing (get money)
It is likely that you already know how valuable buying a home can be to your well-being and to your financial future. But houses are expensive! And, most people don’t have enough cash to buy the house they want or need.
So, the first step is to get money, usually through a mortgage lender and from the money you already have in the bank. There are many many different types of loans with different features like minimizing the amount of cash you need upfront, minimizing the amount you pay monthly, and minimizing the amount of the loan. Shop around with a few different lenders to see what interest rate you can get and what features they offer to suit your preferences. You will also want to get pre-qualified. A pre-qualification letter will be sufficient for most sellers when considering your offer but a pre-approval letter is even better, for both you and the seller.
You may want to ask the lender, “I want my monthly mortgage payment to be $___. What is the sales price of the home I can afford?” Be aware that lenders may pre-qualify you for an amount that is way higher than what you really want to pay monthly. Lenders use guidelines and a formula to determine a realistic monthly payment for you but they may not know that you want to pay your student loans down quickly or that you’re saving up to buy a new car. Those types of expenses personal preferences and will likely not be considered when a lender is just looking at your bank statements and debt amounts.
The key is that you should NOT walk into a home for sale without a letter from a lender or financial advisor stating that you can afford it. If you fall in love with the house, you’ll want to write an offer. But, without a pre-qualification or pre-approval letter, your offer will not be accepted.
Your trusted real estate advisor should be able to provide with you with the contact info for a few different lenders. Getting pre-qualified and pre-approved is free and without obligation. You’ll just need to provide the lender with copies of a few financial documents like bank statements and pay stubs.
Step 2 – Find the Perfect Home (time to go shopping)
Once you have a letter or confidence in knowing the price range of home you are looking for, it’s time to see some houses! Your real estate agent will of course be one of the greatest resources for you to find the home of your dreams. Using the MLS (multiple listing service) your agent can set you up on an email list in which homes that meet your specific criteria are automatically emailed to you as soon as they go up for sale.
We all know of course that you probably won’t be able to help yourself and you’ll be searching for homes online. Realtor.com is a great place to start but please be aware that several disputes and misrepresentations have been made regarding other sites and the data they display. For example, tillow.com and zrulia.com may state that a home is still for sale or that it is only $250,000 but in reality, it just went under contract and was listed at $275,000. Fortunately, realtor.com, pulls its data straight from our MLS, which by real estate law, must be entered correctly by the seller’s agent.
When you find a listing that sparks your interest, let your agent know right away and try to schedule a showing for as soon as possible so that you can see it before someone else comes along and writes an offer. And don’t be afraid to fall in love with the first house you see. At the same time, understand that unless your budget allows for it or you’re building a custom home, some of your tastes and preferences may need to be sacrificed. It is unlikely that you’ll find everything you want but relax, this is the most fun part of buying a house!
Please feel free to write comments or ask questions below.
Up next week… writing an offer and the due diligence period!