As this snowy winter gives way to spring, the housing market is expected to make a significant recovery. Interest rates are slowly climbing upward from their record lows, which is expected to push many prospective homebuyers to action this spring.
If you are one of those Americans looking to purchase a home this spring, it is important to understand some of the unspoken rules of buying a home. Following these five rules can help make your home-buying experience much more productive.
- Find a lender and get pre-approved before beginning your home-buying search
Choosing a lender may be one of the most difficult decisions you make during the entire home-buying process. When looking for a lender, you will want to evaluate which attributes are most important to your personal situation. Different lenders can offer different benefits. For instance, some lenders may have very low interest rates. Other lenders will keep you informed and involved in each step of the transaction and may even be able to close your loan in a shorter time-span. For instance, Total Mortgage maintains competitive interest rates while also guaranteeing that we close your loan in 30 days or less*. Those types of promotions are great if you are trying to close on the home in a hurry.
When working with a big bank, the pre-approval process can take up to two weeks, so it is best to begin the pre-approval process before looking at homes. Many sellers will request or require that you be pre-approved before making an offer on their home. Even some real estate agents will want to know that you are a serious buyer, and may request that you be pre-approved before they show you any homes.
- Check your credit score and do not open any new lines of credit before you close on the home
Your credit score is a key factor for lenders to determine your ability to pay back a loan. If you have good credit history, lenders will be more apt to approve the necessary financing to buy a home.
To some people this may spark the idea to borrow copiously and repay on time. Not so fast. While borrowing and repaying debts on time is the primary method of building your credit score, it can also hurt you when applying for a loan. Even if you have been making timely payments, taking on too much debt can negatively impact your debt-to-income ratio, another key metric that lenders use to determine your ability to repay a loan.
Important: Do not open any new lines of credit before you close on your home. Even if you have already been pre-approved, lenders will review your recent credit history before they transfer the funds into your account. Many pre-approvals will grant the lender the right to rescind the pre-approval if any other lines of credit have been opened prior to closing.
- Always hire a real estate agent
Real estate agents make the home-buying process easier, especially if you are a first time homebuyer.
Despite the vast amount of information now available on the internet, a real estate agent can still serve a valuable purpose. Real estate agents are trained to understand your financial situation and home-buying criteria, and are experts at finding homes that satisfy that criteria. Real estate agents also can be extremely valuable when it comes time to make an offer on the home you desire. A good real estate agent will compare current and past prices of similar homes in the area. This will allow you to make an informed offer while also giving you some negotiating leverage.
Most importantly, the real estate agent’s commission is often paid by the seller, allowing you to get all this expert advice free of charge.
- When you have found the home you want, put down a deposit with your offer
Some areas will legally require you to put down an “earnest money” deposit when you make an offer. Even if the earnest money deposit is not legally required, it is still a gesture of good faith between you and the seller that can drastically increase the chances of having your offer accepted.
The deposit is usually 1-3% of the home’s value. It can be scary to make such a significant deposit without knowledge of whether your offer will be accepted or not, so make sure that your real estate agent or real estate attorney includes a contingency in the purchase and sale contract that will allow you to recover your deposit if the deal falls apart.
- Attempt to establish an emotional connection with the seller
Establishing a personal connection with the seller can help increase your chances of having your offer accepted. Homes often hold significant emotional value, and sellers like knowing that their home will be purchased by a person or family that will value the home in a similar way.
It is true that real estate agents somewhat dehumanize the offer exchange between you and the seller, but there are still ways to show emotion in the process. Common ways to build an emotional connection include submitting a letter with your offer to explain who you are and how much you love the house, and always showing respect to the realtor and the home at showings. The realtor will likely relay that message to the seller when you submit your offer.
via:http://www.totalmortgage.com/blog/purchase/5-unspoken-rules-of-home-buying/23953
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