How To Buy A House can be daunting. Where do you start? How does it work? Hopefully, this blog will answer most of your questions on How To Buy A House. Most people think they should jump right out and start looking at homes. They see something they like and contact a Realtor. But the reality is that if you find a house you fall in love with, you might not be able to afford it. Now you're heart broken and disillusioned with the whole process. So, the best place to start on How To Buy A House is to get a pre-approval letter from a lender unless you have all the cash you need.
1) Contact a lender. There are all types of lenders and all types of programs out there. So, where should you start? Check with your bank or credit union (there are also lender resources at the end of this blog). You don't need to know your credit score, they can find all that information out for you. Here is a break down on the different types of standard loans out there and it's a good idea to be familiar with them when speaking with the bank or mortgage company:
- Conventional Mortgage: This simply refers to any mortgage loan that is not insured by or guaranteed by the federal government. These types of mortgages typically have higher down payment and credit score requirements than other loans.
- FHA: An FHA loan is insured by the government and typically the minimum down payment is 3.5% of the loan value.
- VA: A VA loan is insured by the government and there is no minimum down payment. However, this great benefit is reserved exclusively to those who bravely served our country and select military spouses.
- MSHDA: Michigan State Housing Development Authority (MSHDA) First time home buyers program for residents of the State of Michigan. Offers down payment assistance and more. Here is a link to their website for more information http://www.michigan.gov/mshda/0,4641,7-141-45866_45868---,00.html
- RD: A Rural Development (RD) Loan is perfect for buyers who want a no down payment option. To qualify for a Rural Development loan, buyers and properties must meet the MSHDA qualifications. Here is a link to their webite for more information. https://www.rd.usda.gov/mi
I bought my first house through a state run program similar to MSHDA. I was a single parent with three small children, my credit was borderline and I had a few bills that needed to be caught up. But I went through the program and was able to realize my dream of buying a house. Since then, I've purchased four houses. It gave me just the help I needed to get going. I did it, and you can too! So don't get discouraged.
What you're looking for is called a pre-approval letter. A pre-approval letter basically is a letter from a lender saying you're preliminarily approved for x amount of money to buy a house. This is your "permission to go shopping".
Now, on to step 2...
2) Sit down and really think about what it is you NEED in a house. How many bedrooms are needed? Do you need a garage? Do you need a big yard for your children to play in? What is it that you really NEED in a house? Now make a list.
Ok. Now let's add to the list. What is that you WANT in a house? Want's and needs are very different things. Want's are the extras. If it had a swimming pool is that a plus? If the house had a fenced back yard so your children would be safer is that a plus? If it had natural gas heat is that a plus? Add to the bottom of your list what you want in a house.
3) Contact a Realtor and show them your list. The Realtor needs to know how much money you are pre-approved for and what it is you need and want in a house. It's equally important to tell your Realtor what area(s) you want to live in.
Your Realtor can then pull up some listings on the MLS (Multi Listing Service) and show you houses that meet your criteria. Your Realtor will then schedule appointments to provide you with a private showing of the houses you've selected.
How To Buy A House is getting easier, isn't it? It's basically a step-by-step procedure which, when followed, flows pretty smoothly.
So now you've found the house you've always dreamed of. What now? Step 4...
4) You make an offer on the house. Making an offer on the house is the start of negotiations. There are always 3 answers in Real Estate. No, Yes, and Ok but I want xyz. If the price of the house is, let's say, $100,000 that doesn't mean you have to offer them $100,000 on the house. You can always go up, but you can't go down. I wouldn't recommend low balling them though either. Come up with a reasonable offer on the house. Your Realtor will write up what's called a Purchase Agreement. The Purchase Agreement will detail things such as the legal description of the house, the offer price, how many days the seller has to respond to your offer, which inspections you'd like done on the property, etc.
Once the Purchase Agreement is sent to the selling Realtor the seller has 3 choices. They can accept your offer (Yes). They can deny your offer (No). Or they can accept your offer with additional requirements (OK but I want xyz). These additional requirements could be a price change. "Offer accepted, however price to be $105,000". Or it could be a simple as they don't want to include the washing machine.
If the Purchase Agreement was excepted, EXCELLENT! If not, you as the buyer now have those same 3 choices. You can accept it as written (Yes). You can say No. Or you can accept the offer with additional requirements (OK but I want xyz or NO but how about xyz). Negotiations continue hopefully until you have a signed Purchase Agreement where both parties agree to everything in writing.
Now you have a signed Purchase Agreement. How To Buy A House just turned into "I'm buying a house!"
5) Your Realtor will submit the Purchase Agreement to your lender (It can take 6 weeks or more for a lender to close the loan, don't get discouraged!) At this point your Realtor will also schedule any required or desired inspections of the property.
6) Closing the sale. Your Realtor or lender will notify you ahead of time when a closing date and time is set. You will be required to get a bank certified check for a specified amount to bring to closing with you. You'll sit down at the closing with a company that has prepared all your title work and paperwork. Expect to be there at least an hour. There will be many many forms for you to sign unless this is a cash sale.
So, to recap here are the 6 steps to How To Buy A House:
1) Contact a lender and get pre-approved.
2) Write down what you need in a house.
3) Contact a Realtor.
4) Make an offer on a house.
5) Lender approval and inspections.
6) Closing the sale.
Now you've gone from How To Buy A House to I Just Bought A House! Congratulations.
For more information on How To Buy A House or to search for your new home, check out my website at http://www.newaygocountyrealestate.com/
You can also obtain more information on How To Buy A House by calling, emailing, or texting me at:
Amber Wakefield, Realtor
Coldwell Banker Schmidt Realtors
I always recommend contacting your bank or credit union first for a pre approval letter. However, if needed, here are two great lenders to contact for a pre-approval letter:
Treadstone Mortgage, Mike Marsman 616-437-3962 NMLS# 138868
Download Mike's app to your phone and apply by clicking this link: https://michaelm.mortgagemapp.com/
How To Buy A House has never been easier!