|
Law Notes - January 2002
by John Duffy
With
interest rates at record lows, more and more people are considering buying their
own home. While the somewhat complicated process of buying a house scares
people, it shouldn't. Buying a house is like any other transaction: it requires
research to educate yourself and make an informed decision. This column will
outline the steps that should be taken if you are considering buying a house. A
home will probably be the biggest investment you ever make. Therefore, you
should consider consulting a professional realtor, lawyer, appraiser, etc., to
assist you in the process when you have questions.
The first
step is deciding to buy. This is largely a personal decision but there are some
factors to consider. First, why do you need a house? Second, how long do you
plan to own this home? Third, do you have enough cash for a down payment,
closing, and moving costs? Fourth (and maybe most importantly), can you afford
a monthly mortgage and still pay your bills? Consider these questions before
beginning the home buying process.
The next
step is getting organized. Check you credit history and correct any problems,
if any. Second, organize loan documents and financial information that the
lender will request. Third, start looking. This is by far the most exciting
step in the process. Fourth, investigate your insurance options. Get quotes
and determine how much this will add to your monthly payment. And last, get
pre-approved. Getting pre-approved will give you an estimate of how much you
can borrow and how much house you can afford. Getting organized now will save
scrambling and rushed decisions later.
After
you've gotten pre-approved, start seriously shopping for a home. The house
market fluctuates and is regional. Know your market. Remember, as a
pre-approved buyer, the ball is in your court. Also, consider at this time
working with a real estate agent. An agent is like a house-buying counselor who
can guide you through the process, for a fee. Whether you work with an agent or
not, draft a list of questions that you will ask each time you look at a house.
This list will reflect your wants and needs and help you decide which house best
meets those.
The next
step, after you've found a house that fits your needs, is making an offer.
Again, research is the key. Find out what the current market conditions are,
the prices of comparable homes in the area, the current value of the home, and
why the seller is moving. Make an offer within your ability to pay, include
your pre-approval letter, and be clear as to the conditions of your offer. You
will usually be required to pay a deposit with your offer. The seller may
accept your offer, reject it, or respond with a counter offer.
If your
offer is accepted, choose a lender or mortgage broker. You will have to submit
all kinds of records, including tax returns, pay stubs, bank statements, etc.
This is where you'll be glad you organized your financial information before
starting the process. Typically, you must close on the deal within a set time
period, often thirty days. If your affairs are not in order, it will be a
stressful month gathering the required information. Finally, choose a loan.
This topic alone could be a Law Notes column. In a nutshell, if you don't know
what you're doing, seek help. There are lots of lenders out there, from the
local bank to online companies specializing in home loans.
Now you
are ready to close the deal. The most important point is to set a closing date
that works for you. You should consider tax implications and, if there are any,
set the date to benefit you. Next, estimate your closing costs (lenders must
give good-faith estimates of closing costs, ask for an itemized list). You will
also want to schedule a final walk-through to make sure the house is in the
condition you agreed upon and all required repairs have been made. You will
meet with the seller and possibly your agent and the deal will be concluded.
(If you
are a first time home buyer, or haven't owned a home for the past three years,
consider a South Dakota Housing Development Program loan. This program will
make a house more affordable by lowering the interest rate on your loan. Visit
them online at
sdhda.org or call at 773-3181. For general house buying information and
guidance, see
homeadvisor.msn.com)
|
