Home Buying Guide
Buying a home is a big financial decision and can also be stressful. Thankfully, you have me to help! Understanding key parts of the process is important, especially for a first time buyer. Preparing your finances, partnering with the right lender, and allow me to work for you can help you secure the home you want and can make the experience go smoothly.
Before going through this buyers guide. There are few quick steps you can take to start moving in the right direction.
- SEARCH for a home the easiest and correct way. Most people today like to search on the go, or laying in bed at night. I recommend using the app HomeScout. You can get info and download it here. It’s great because it’s easy to use, but it also give you all types of other great information about the areas of each home like schooling, crime, shopping, entertainment, and more.
- GET LISTINGS! Once you have an idea of what you’re looking for, let me know by going here to the homepage and fill out the form so I can send you all available properties directly to your email from the local Middle Tennessee MLS. Even if you’re not quite ready, it’s still fun to see great homes on the market and get a feel for what’s out there.
- USE TOOLS like these Mortgage Calculators and learn about the current mortgage and interest rates to get an idea of what you will be able to afford so you know what to search for, and what you’re monthly payments might look like.
- BE IN THE KNOW by learning a little bit of real estate business and lingo. You can get answers to a lot of great questions here.
Once you’re done having fun with the tips above, here are a few steps to get in the right position and mindset for buying:
1. Get your finances in order
Before shopping for a home, examine your own finances, including your credit reports and scores. Banks will use your credit status to determine how much you can borrow, and what interest rates you’ll pay. The better your credit, the more likely you are to receive a favorable loan. Check on your credit at one or all of the three federally recognized credit reporting agencies, Experian, Equifax and TransUnion. Clear up any errors before you apply for a loan. Talking through this with a good loan officer can help too. They can tell you exactly what you need to know about your personal credit, debt-to-loan ratio, and all costs associated with purchasing a home like “closing costs”. Regardless of who is paying the closing costs, or how they might be split up, they usually average around $6500 – $10,000 (based on Nashville-Middle TN market and price point).
The lender is also the person you’ll want to talk to about your downpayment. Depending on what type of loan you get (Conventional, FHA, VA, and more), a downpayment can be anywhere from 3% – 20%. And finally, you don’t want to be house broke when it’s over. It’s recommended to have a few months of income saved in reserve AFTER your downpayment and closing costs. Some people use this time to try to use all of their money for closing, down payment, and the remainder for paying off debt. While paying off debt is awesome and wise, you don’t want to move into your home with $0 in the bank.
2. Get a preapproval for a mortgage
Prequalification or preapproval helps you know how much house you can afford, and streamlines the home buying process. During prequalification, your lender will examine your finances to determine which types of mortgages are available to you and how much they would be willing to lend you. The preapproval process requires more in-depth information about your finances, including how much you have saved for a down payment, but represents a commitment from a lender for a loan amount. Overall, having a preapproval give you an advantage when making an offer over other buyers who have not yet contacted potential lenders. Many times, I like to get my buyers as close to the underwriting process as possible even before making and offer. Having a “good-to-go” from the underwriter basically means that theres very little a chance your financials will fall through before closing. Also, with underwriting done or close to it, sometimes you can make a strong offer that closes in as little as 2 weeks.
3. Now let’s find your home!
Once you at least have a preapproval, you’ll know the price range of homes you can start looking for. This is important because you don’t want to go backwards. Having your heart set on a $500,000 home, when the absolute most you can borrow at the time is $465,000 can really put a damper on your experience. Even before a preapproval, you can figure out about what your price range will be by using these income and mortgage calculators.
Once we have an idea of price range, I’ll set you up on a specific search for properties. We can find homes in a few different ways. For one, you’ll begin receiving emails from me with all of the market’s inventory that meet requirements for what you’re looking for. Sometimes even daily- you don’t want to miss anything because they can go fast in the Nashville market. When you see homes you like, we’ll set up the showings and go check them out!
4. Make the offer
Once you’ve found the house you want to buy, we’ll make the offer. This is the part where I’ll negotiate with the seller’s agent on behalf what your requests. We’ll discuss price, downpayment, closing date, and any contingencies to a make a strong offer. Once we like the offer, I’ll send it over to the seller in written form. When the seller agrees to the offer, it becomes a contract. Along with the contract, a monetary commitment is required called “earnest money”. This money is delivered to the sellers, or sellers agent, and held in an escrow or trust account. The amount is usually about 1% of the homes value and in the end will go towards your down payment. So if your downpayment is $10,000, and you paid $2500 in ernest money, you’ll only owe $7500 more in the end to close.
5. Get an inspection & the appraisal
Once your offer is accepted, we’ll set up a home inspection to identify any problems with the property that need to be fixed before completing the transaction. In lieu of fixing a problem, the seller may be willing to reduce the price of the property to cover your costs for repairs. For example, this is where termites may be found which is actually pretty common in Tennessee. If found, the sellers are required by law to order and pay for termite remediation. So I never recommend waving an inspection! If you’re using a mortgage lender, they’ll order an appraisal (required) which is a professional opinion of price so the lender can determine your loan-to-value ratio (how much you can borrow based on the appraisals opinion of price). Cost for both inspection and appraisal will total around $700 – $1200.
6. Get final approval from your loan officer & underwriter
At this point, you’re working with your mortgage lender to finalize the details of your mortgage. Based on the contracted purchase price, your lender will determine monthly payments based on your interest rate and other expenses, such as escrow payments to cover property taxes. This is also when you’ll determine who you’ll use for homeowners insurance and get a quote. A mortgage is a package payment which usually includes your principle, interest, home owners insurance, any PMI or MIP, taxes and other fun stuff you can ask your lender about.
7. Close the deal
The closing is when you sign all the paperwork needed to complete the purchase of the home, including final loan documents. Your lender will release the funds from your mortgage to the closing agent in return for the property’s title document. At this point, the title of the property is transferred to you and the seller will turn over the keys—making you a homeowner! Then we go party.