House Purchase

Purchasing a house, whether it is your first house, an investment property, or vacation home, can be an exciting yet difficult process. There are numerous moving parts to consider including whether it is something you can afford and if it is a good investment. As your trusted advisor, Townsend Financial Life Management is able to help you with some of the tough decision making involved when deciding whether to purchase that new property.

Here are some of the steps involved in purchasing a home:

1) Start your Research

Start looking at websites, newspapers, and magazines with real estate listings. Start to determine the qualities you are looking for in a home and start getting an idea of what comparable homes are going for in the area.

2) Determine How Much You Can Afford

Nothing is worse than getting your heart set on the home of your dreams only to realize you can’t afford it. Lenders typically will approve buyers for three to five times your annual household income, although the exact amount varies based on a number of factors. You will also need money put aside for a down payment and certain closing costs.

To help you save for a down payment, try opening an investment account with auto deposits on a monthly basis.

3) Get Prequalified and Pre-approved

Before you start looking at homes, you will need to find out how much financing you will get approved for. To get prequalified, you will need to provide some financial information to your mortgage broker who will have their underwriter determine how much you can afford to repay. Make sure to speak to several mortgage brokers as the underwriters at different institutions have different processes to prequalify individuals.

4) Find a Real Estate Agent

We think it is very important to find a real estate agent you can trust to help you with not only finding a house but to help with all of the closing documents. Your real estate should also be knowledgeable about the local neighborhoods, have good negotiating skills, and be very familiar with the home buying process. It is important to find a professional real estate agent who does that full time, not someone who shows houses on the side.

5) Shop for your Home and Make an Offer

Since you have now started to decide what kind of home you are looking for and how much you can afford, start visiting homes with your real estate agent. Take pictures while you are there so you can refer back to them later. Make sure to look at the details while you are walking through the house, testing the plumbing (flush a toilet, turn on a sink, etc.), checking the electrical (turn on lights and fans, look at the circuit breaker panel, etc.), and check the windows and doors. Also, be sure to stand outside for a little while, listen for traffic noise, look and see how well maintained the neighbors' houses are, is there enough room for parking out front, does the grass look like it hasn’t been watered properly (might mean the sprinkler system isn’t working).

6) Get a Home Inspection

Typically purchases are contingent on a home inspection to check for damage or required repairs. This contingency gives you the chance to renegotiate or back out of the deal without penalty if the inspection reveals significant damage. Your real estate agent can often help find a home inspector. Make sure there are no financial ties between the inspector and real estate agent, as this can cause a conflict of interest and may result in you being stuck with repairs you were not informed of.

After the inspection is completed, a report will be delivered to you and the seller. You can then decide if you want to ask the seller to make any repairs prior to closing. If any repairs are agreed upon, you will have a chance to do a walk through prior to closing to make sure the agreed upon repairs have been made.

7) Choosing a Mortgage

There are a number of different mortgage options to choose from when it comes to getting a loan for a house. You will want to make sure to shop around for a mortgage that meets your needs and is the best price. A small difference in the amount of interest you pay can mean the difference of thousands of dollars over the life of your mortgage.

8) Have the Home Appraised

Lenders will arrange to have the home appraised to make sure you are paying a fair value for the home. The appraiser is a third party company not affiliated with the lender who gives a fair value. The appraised value is not necessarily the agreed upon closing price.

9) Coordinate the Paperwork

There is a lot of paperwork involved with purchasing a home. Your lender will coordinate with a title company to check to make sure the owner is the rightful owner of the property and make sure there are no prior liens against the property.

10) Closing the Sale

Sign on the dotted line! At the closing you will sign the paperwork to close the sale of the house and the loan documents. After the loan documents have been processed and a check sent to the seller, you are ready to move into your new home.