8 Resolutions to Help Get You in a New Home in the New Year
Saturday December 29, 2012
Is one of your New Year’s Resolutions to move into a new home in 2013? One of the keys to making the home-buying process easier and more understandable is planning. In doing so, you’ll be able to anticipate requests from lenders, lawyers and a host of other professionals. Furthermore, planning will help you discover valuable shortcuts in the home-buying process. Follow these steps to achieve your goal of home ownership in 2013.
Resolution #1: Decide What You Want
Let’s start with the fun part. The first step is to decide what you are looking for. You need to determine the what, where, and when of your purchase. What kind of house are you looking for? Where would you like to live? When would you like to buy? Spend a lot of time thinking about this, a new home is a serious commitment and you want to choose somewhere where you can happily live for several years.
It can be helpful to write down all the information you have gathered. Be sure to take note of other important factors such as whether or not you hope to expand your family or if you plan to remain at your job for a long period of time. Consider such things as pricing, location, size, amenities (extras such as a pool or extra-large kitchen) and design (one floor or two, etc.). You may want to order your priorities so that you will be prepared to make difficult decisions quickly. If you can’t get a home at your price with all the features you want, then what features are most important? For instance, would you trade fewer bedrooms for a larger kitchen? How about a longer commute for a bigger lot and lower cost?
Resolution #2: Get Your Financial House in Order
Once you have an idea of what you are looking for it’s time to get realistic and determine what you can afford. How much do you have available for a down payment? What is your monthly budget for a mortgage payment? Do you have money for closing costs and taxes? Is your financial house in order? Few people can buy a home for cash. According to the National Association of REALTORS® (NAR), nearly nine out of 10 buyers finance their purchase, which means that virtually all buyers — especially first-time purchasers — required a loan. You should start the mortgage process early. By meeting with lenders — either online or face to face — and looking at loan options, you will find which programs best meet your needs and how much you can afford.
Resolution #3: Get Your Pre-Approval
“Pre-approval” means you have met with a loan officer, your credit files have been reviewed and the loan officer believes you can readily qualify for a given loan amount with one or more specific mortgage programs. Based on this information, the lender will provide a pre-approval letter, which shows your borrowing power. You can visit as many lenders as you like and get several pre-approvals, but keep in mind that each one carries with it a new credit check, which will show up on future credit reports.
Although not a final loan commitment, the pre-approval letter can demonstrate your financial strength and show that you have the ability to go through with a purchase. The loan officer will carefully review your financial situation, including your credit report and other information. The lender will then suggest programs which most-closely meet your needs.
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Resolution #4: Find Your New Home
Now we are back into the fun stuff. A home is more than just a collection of bedrooms and bathrooms. Several properties — each with four bedrooms, three baths, and the same price — may well represent radically different designs, commuting distances, lot sizes, interior dimensions, and exterior finishes. Here’s where the information you gathered in Resolution #1 comes into play. You already know what you want.
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Resolution #5: Understand Your Mortgage Options
The best rates and terms are only available to those with solid credit. To get the best loans, make a point of paying credit cards, installment payments, rent and mortgage bills in full and on time. To obtain a loan you must complete a written loan application and provide supporting documentation. Specific documents include recent pay stubs, rental checks and tax returns for the past two or three years if you are self-employed. During the pre-qualification procedure, the loan officer will describe the type of paperwork required. Mortgage financing can be obtained from mortgage bankers, mortgage brokers, savings and loan associations, mutual savings banks, commercial banks, credit unions, and insurance companies.
Resolution #6: Protect Yourself With Insurance
No one would drive a car without insurance, so it figures that no homeowner should be without insurance. Title insurance is purchased with a one-time fee at closing, title insurance protects owners in the event that title to the property is found to be invalid. Coverage includes “lenders” policies, which protect buyers up to the mortgage value of the property, and “owners” coverage, which protects owners up to the purchase price. In other words, “owners” coverage protects both the mortgage amount and the value of the down payment.
Homeowner’s insurance provides fire, theft and liability coverage. Homeowners’ policies are required by lenders and often cover a surprising number of items, including in some cases such personal property as wedding rings, furniture and home office equipment. In high-risk flood-prone areas, flood insurance may be required. This insurance is issued by the federal government and provides as much as $250,000 in coverage for a single-family home plus $100,000 for contents.
For new homes, home warranties provided by home builders are generally designed to provide several forms of protection: workmanship for the first year, mechanical problems such as plumbing and wiring for the first two years, and structural defects for up to 10 years. In the event of a covered defect or breakdown, the warranty firm will step in and make the repair or cover its cost. Be sure to check out the Warranty Program information page on our website for a breakdown of everything that is offered through the 2-10 Home Buyers Warranty Program provided with every new Lamar Smith Signature Home.
Resolution #7: Close On Your New Home
The closing process is increasingly computerized and automated. In many cases, buyers and sellers don’t need to attend a specific event; signed paperwork can be sent to the closing agent via overnight delivery.
Settlement is a brief process where all of the necessary paperwork needed to complete the transaction is signed. Title to the property is transferred from seller to buyer. The buyer receives the keys and the seller receives payment for the home. Deeds, loan papers, and other documents are prepared, signed and filed with local property record offices.
Before closing, buyers typically have a final opportunity to walk through the property to assure that its condition has not materially changed since the sale agreement was signed. At closing itself, all papers have been prepared by closing agents, title companies, lenders and lawyers. This paperwork reflects the sale agreement and allows all parties to the transaction to verify their interests. For instance, buyers get the title to the property, lenders have their loans recorded in the public records and state governments collect their transfer taxes.
Resolution #8: Tie Up Loose Ends
You’ve done it. You’ve looked at properties, obtained financing and gone to closing. What’s next?
Those papers you received at settlement are extremely valuable, so hold on to them! In the short-term they can help establish tax deductions for the year in which the property was purchased. In the future, such papers will be important for tax purposes when the property is sold, and in some cases, for calculating estate taxes.
Many owners make a photo or video record of the home and their possessions for insurance purposes and then keep the records in a safety deposit box. Your insurance provider can recommend what to photograph and how to secure it. You want to maintain fire, theft and liability insurance. As the value of your property increases such coverage should also rise.
Enjoy your home. Owning real estate involves contracts, loans, and taxes, but ultimately what’s most important is that home ownership should be a wonderful experience.