Appraisals & Market Value:
A comparative market analysis and an appraisal are the two most common and reliable ways to determine a home’s value. Your real estate agent can provide a comparative market analysis, an informal estimate of value based on the recent selling price of similar neighborhood properties. Reviewing comparable homes that have sold within the past year along with the listing, or asking, price on current homes for sale should prevent you from overpaying. A certified appraiser can provide an appraisal of a home. After visiting the home to check such things as the number of rooms, improvements, size and square footage, construction quality, and the condition of the neighborhood, the appraiser then reviews recent comparable sales to determine the estimated value of the home. Lenders normally require an appraisal – which run between $200 to $300 – before they will approve a mortgage loan. This protects the lender by ensuring the home is worth the money you want to borrow. You also can check recent sales in public records, through private firms, and on the Internet to help you determine a home’s potential worth.
1. Consider this question: Is owing a home right for you? Deciding where to live is one of the biggest decisions you will ever make. It is important to make sure that you prepare yourself with the information you need to find the right home for you.
2. Ready? Follow our step-by-step guide to begin your journey to owning your first home today!
3. Am I Ready? It’s an exciting time, but before you head out in search of your new home, take some time to review your finances. Be sure to consider the expenses involved in owning a home when you outline your budget
4. The Costs of homeownership.
5. Credit & Credit Histories. It’s no secret. Your credit history is an important factor that affects your ability to obtain a mortgage for the purchase of your home. Lenders want to see how you borrowed and repaid money in the past. This is reflected in your FICO score. FICO scores range from 300 to 850, and lenders believe that borrowers with higher scores are more likely to repay their loan.
6. Down payments You will need to make an up-front investment in your new home in order to get a mortgage. The amount of the down payment, or the initial payment made when buying a home, will also impact your ability to get a mortgage as well as the interest rate and terms of the mortgage loan. Buyers who contribute their own funds to the purchase of a home are considered a better overall credit risk. If you’re making a down payment that is less than 20% of the home price, mortgage insurance will be required.
Applying for a Loan:
Pre-qualification vs. pre-approval
Before you make an offer, you can pre-apply for a mortgage loan. You can visit a mortgage lender and supply your personal financial information. The lender will estimate the loan amount that you may qualify for based on your income and credit history. While you’re shopping around for a loan, you may hear the terms “pre-qualified” and/or “preapproved.” It is important to understand the difference between these terms. Pre-qualified means that you would qualify for a mortgage but it does not guarantee you a mortgage or a rate. Being pre-qualified is useful in the negotiating process because it will give the seller confidence that you’ll be able to get a mortgage once the time comes. Pre-approved, on the other hand, guarantees you a mortgage at a specified rate. It’s important to note that obtaining a pre-qualification or pre-approval from a lender does not obligate you to get a loan from that lender.
Finding an Affordable Property:
I. Location and its impact on your finances. Back One we presented you with the mortgage and affordability calculators to help you get a clearer picture of your budget and what your monthly mortgage payments might be. Although the mortgage and affordability calculators are extremely helpful tools, it is also important to understand that there is more to housing affordability than how much rent or mortgage you pay. Aside from a mortgage, transportation costs are the second largest budget item for most families. It is important to seriously consider the location of your new home and how transportation costs may affect your budget. Finding the right home. Conducting the search yourself is certainly manageable, but a fair bit of organization and professional insight could be very helpful. First identify towns that fit your needs, and then seek out homes in those towns within your price range. Schedule appointments with your Elite Team Professional to view homes for sale, or find open houses you can attend. There are a number of resources that will help you find the right house for you:I. Websites such as www.realtor.com, www.trulia.com, and www.theeliteteamrealty.com and call a Professional at the Elite Team Realty, Llc.
II. Newspapers, local print media, Home Shopper and local Magazines
III. Searching for “For Sale” signs or open houses in target areas
IV. Talking to friends, acquaintances, co-workers
1st and foremost contact your Elite Team REALTOR® who can provide expertise on market trends, property conditions, and many other aspects of buying your first home.
Attending an Open House is serious business. Remember that an Open House is a sales tool that homeowners use to market their homes. Make sure you refer to your list and keep an open mind. To help keep your focus, keep in mind the following:
I. Bring a notepad and map so you can mark each home’s location and note its special features.
II. Pick up a listing sheet whenever one is available.
III. After a day of open houses, you may find that a home has more or less appeal than you initially thought.
IV. Pace yourself. Visit too many homes without a break and you’ll start missing details.
V. If you are going to look at a lot of houses, take breaks. See three homes in the morning, then stop and have lunch. See three more, then stop and do something else. See three more in the evening and call it a day.
VI. Bring a camera and snap pictures of the houses that appeal to you. Grab photocopied pictures if they are available.
VII. Make a rough sketch of the floor plans of the homes you are considering.
VIII. Remember, there are no foolish questions. Ask your Professional at Elite Team Realty for help and guidance.
IX. Additionally if you are attending open houses on your own inform the hosting agent of the Open House that you are working with your Elite Team Realtor.
You want to know everything you can about each property, so be prepared to ask lots of questions. One question about pipes, heating or cooling systems, taxes, or recent repairs may lead to other questions. You may find areas of concern about a specific property that looked trouble-free. It’s far better to know about a home’s problems before you buy than it is to discover them once you own the property.
Negotiating & Closing the Best Deal:
After carefully searching with your Elite Team Professional, you finally found the right home and you’re ready to make an offer.
Considerations for the offer: You may want to think about the following as you prepare your offer:
I. Ask for sellers Property Disclosure!
II. Are any repairs needed? What will they cost? Are the sellers willing to share any of the expense?
III. How long has the property been on the market?
IV. How active is the market (i.e., buyer’s or seller’s market)?
V. Are the sellers anxious to sell?
VI. Is the property in a particularly desirable location or school system?
VII. Does the home meet many, most, or all of the items on your wish list?
Preparing the Offer:
I. Your name and the seller’s name
II. The property’s address
III. Any special provisions regarding fixtures, appliances, etc.
IV. The purchase price being offered (including the deposit put down to bind the offer and the deposit to be paid upon the execution of the Purchase and Sale Agreement)
V. Any additional riders and deadline dates
VI. Any contingencies to which the offer is subject (e.g., pest inspection, securing financing) or selling your current home.
Timing and deadlines
Now it’s time to get out your calendar. Take time to think about how long it will take you to negotiate the offer with the seller, get an inspection, and get approved for a mortgage. Consider meeting those deadlines when you set a closing date. Your deal could fall through if deadlines aren’t met.
Negotiating the offer
After you make your offer, the seller may accept, reject or counter it with a different price. If the seller counter-offers, you can then accept, reject, or counter that. While the negotiation goes on, the house will stay on the market.
Do I need an attorney?
To protect your best interests, we recommend that you retain an attorney when purchasing your home. The attorney will also:
I. Provide you with a three-day right of review of the Purchase and Sale Agreement
II. Help negotiate the conditions of the sale
III. Draft and/or revise the Purchase and Sale Agreement to protect you and your money
IV. Attend the closing and represent your interests
Making an Offer:
Purchase and Sale Agreement It’s not over yet! Prior to negotiations a Purchase and Sale Agreement is written up by your Elite Team Professional. This document spells out the agreement in specific detail. Once both you and the seller sign it it is than forwarded to the attorneys for review. Hence the three day attorney review period begins.
Provisions and contingencies
Your first line of defense before you go into contract on your first home is to include provisions and contingencies in your offer. This ensures that you and your money are protected in the event that the loan is not approved and the deal is called off. It is very important that the Purchase and Sale Agreement include a mortgage contingency clause, which states that your buying the home is dependent on your ability to get a mortgage. Such a clause allows you to keep your deposit if your mortgage isn’t approved. Other contingencies to be added to the Purchase and Sale Agreement should be based on the home’s condition, pest, radon, and lead paint inspections. The closing date and occupancy date should also be indicated.
The home inspection
You wouldn’t buy a car without taking it for a test drive, the same goes for a home. Having a professional assess and inspect the home will help you know if you are getting what you’re paying for. Once you schedule an inspection, a home inspector will look carefully at the condition of the home, letting you know about any potential problems or necessary repairs. Home inspections usually occur within 14 days of the close of the Attorney Review period. An inspection usually costs a few hundred dollars and is paid for by the buyer.
Prior to closing:
Prior to closing on your new home, you and your lender need to complete a few final tasks.
Before the lender gives you a mortgage, a title search must be done to verify that the seller truly owns the property and that there are no liens (claims) on the property. If there are any claims, the seller is required to pay them prior to the closing.
The lender will require title insurance to protect its investment in case a question about the validity of the title arises after closing. Additional title insurance to protect your investment is also available. Generally, the buyer pays for title insurance.
You will need to obtain homeowner’s insurance prior to closing. A paid receipt and declaration of issuance must be presented at closing.
Most transactions will require providing the lender with a certified property survey. The survey is a technical drawing of the property and its structures. A survey can take a few weeks and should be ordered well in advance of the closing date. The buyer is usually responsible for ordering and paying for the survey.
The lender will order a flood search on the property you are buying. The flood search determines whether the property is located in a designated flood zone. Federal flood insurance is available to those residing in flood zones and may be a condition of the mortgage commitment.
If the property you are purchasing contains a septic tank, a system certification by an engineer or septic expert may be required.
The state requires that drinking water wells be tested for contaminants. If the property’s served by a well, you will be given test results. You should consider test findings carefully and contact the county health offices if you have any questions.
In certain areas, a termite inspection must be completed prior to the closing. The seller generally pays for the property to be inspected for termite damage and infestation by a termite inspection firm. A certificate of inspection should be delivered to your lender before the closing.
The Closing Process:
Excited about finally moving into your new home? There’s just one more step left – the closing. Ownership is transferred to you from the seller and money is exchanged. It’s stressful but your Elite Team Realtor and attorney will be there to guide you through the process. How do I prepare? You should walk through the home within 24 hours of the closing to make sure it looks as you expected and is in move-in condition. This final inspection gives you the opportunity to see that the seller has moved out and completed all repairs agreed to in the sales contract. Make sure all appliances and systems are working and that any items the seller agreed to leave behind are in the house. If you discover something after the closing, you have no way out, so be sure to walk slowly and look carefully.
What do I bring to the closing?
The mortgage lender’s attorney will let you know exactly what documents you should bring. Typically, you need a form of photo or state-issued ID, a cashier’s check to cover the closing costs (the attorney or closing agent will let you know the correct amount), and a homeowner’s insurance policy.
What happens during closing?
The closing usually takes place at the attorney or mortgage lender’s office. You will be asked to sign a lot of documents, so make sure you read each one closely.
There are some costs that will need to be paid at the closing. Your attorney will go over your HUD-1 Statement with you, which itemizes all the costs. Some standard costs include:
I. Down payment.
II. Attorney fees.
III. Title search (a check of the title records to ensure that the seller is the legal owner of the property and that there are no liens or other claims outstanding).
IV. Title insurance (to protect the lender and/or the buyer against loss arising from disputes over ownership of a property).
V. Municipal lien search (to determine that there are no outstanding legal claims against the property that must be paid when the property is sold).
VII. Credit report and a certified plot plan.
VIII. A full-year insurance binder.
IX. Recording fees and transfer charges.
X. Prepaid interest due on the mortgage for the month in which you are closing the loan.
The closing agent will provide the buyer (you) and the seller with a list of all the costs that must be paid at this time. You make these payments and sign for your mortgage.
The owner will give you title to the house in the form of a deed. The title and mortgage will be recorded in the County Clerk’s Office.
The closing process is now complete and you have just purchased your first home. You are now officially New Jersey homeowners! We hope that our step-by-step guide proved to be a helpful resource along the way.
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