Buying a New House

Understanding the home buying process

BY JASON STEVENS

JUNE 10, 2021

buying-new-home-process desktop

So you’re ready to purchase your first home. Congratulations! That’s a big step. While house hunting can be an adventure, actually buying a new house can seem like a daunting task and a whole lot of money up front. Here’s a list of things you need to consider when kicking off the home buying process for the first time:

Get mortgage preapproval

A mortgage preapproval letter is essentially tangible proof that you can afford to buy a new home. Many sellers will only look at prospective buyers who already have that preapproval letter, particularly in a strong real estate sellers’ market. You’ll have to fill out a mortgage application that includes your employment history, income and expenses, and assets and liabilities. Throughout the preapproval process, mortgage lenders will also pull your credit report. All of these factors determine your home loan type, interest rates, and how much a lender will loan to you. Just keep in mind that mortgage preapproval letters are only good for a finite amount of time — typically 60 to 90 days — in case your finances change.

When searching for a mortgage lender, check online sites, your local bank, or a credit union for the best terms. If you prefer to have a professional find the best interest rates for you, look for a mortgage broker, who acts as a go-between to match you with the right lender.

Determine your price

Before you even begin your search, sit down and calculate how much money you can comfortably spend. Just because you qualify for a $600,000 conventional mortgage loan doesn’t mean you should plan to purchase a $600,000 home. Look at your income, your financial goals, your savings, and any expenses. In addition to a monthly home mortgage payment, you’ll want to factor in property taxes, home insurance, utilities, general living expenses, and any outstanding debt you may have. Also keep in mind the following costs when you close on a home:

  • Down payment: Your down payment is the money you’ll pay toward the purchase price of the home. Experts recommend anywhere from 10% to 20% of the home’s price (20% and above means you’ll avoid extra mortgage insurance added to your monthly balance). Keep in mind that your down payment falls outside of your home loan, meaning if the purchase price of your home is $400,000 and you put down 10%, you’ll pay $40,000 up front and borrow the remaining $360,000 from your mortgage lender.

  • Closing costs: When you close on a house, you incur fees from the title company and the lenders who work on the transaction. Closing costs are about 3% to 5% of the home’s value depending on your area, and you’ll likely want to pay them out of pocket at the time of closing. There are, however, ways to defray those closing costs. You can ask that the seller pays closing costs or you may be eligible for an FHA loan or another home buying loan in your state.

Find a realtor

A real estate agent can help you navigate the entire home buying process. Wondering how to buy a new-construction home or that older fixer-upper? These commission-based agents take you to look at properties in your price range with the amenities you desire. They’ll also help determine the right amount to offer on a home, they’ll assist you with completing paperwork once your offer gets accepted, and they may even be able to alert you to first-time homebuyer assistance programs.

A good first step to finding the right realtor is to ask friends and family for recommendations. Look for an agent who’s a member of the National Association of Realtors, a group that holds its members to a code of ethics. You also may want to interview a few agents before making your final decision. While professionalism certainly is key, you want to ensure you find a realtor that clicks with you and can work within your budget and needs.

Look in the right places

The old “location, location, location” trope holds true. However, where you end up buying is a bit more nuanced than that. Let’s say you found the perfect starter home in a historic neighborhood. Before you put in that offer you’ll want to determine:

  • Whether the neighborhood is safe. Check with other neighbors, join NextDoor to get a sense of the area, or check out an online neighborhood safety tool, such as AreaVibes or CityProtect.

  • What the other houses look like in the neighborhood. That cute 1920s bungalow you have your eye on is a charmer, but the neighbor’s rusted car in the driveway and overgrown grass may not be a great sign, particularly when it comes to neighborhood resale value.

  • How the schools are. You and your partner may not be quite ready to expand your family, but when you do you’ll want to ensure your children will have excellent educational opportunities. Most real estate sites include school zoning information.

  • Which amenities fit (or don’t fit) your lifestyle. Look at what’s around the home. Do you need easy access to a grocery store and pharmacy? Is there a good park nearby to walk your dog? Are you close to public transportation? Is the home a little too close to a railroad track or busy highway for your comfort?

Determine improvements you need to make

Your purchase price doesn’t factor in any renovating you’ll need to do. That urban loft, with its high ceilings and picture-perfect living room brick wall, may be completely move-in ready, but the three-bedroom, two-bath suburban home may need its 1980s carpet ripped out, a new water heater, a kitchen overhaul, a home security system installed, and a fence for the yard. Factor in the cost of renovations before you put down an offer on a new home. A leaky air conditioning unit that needs replacing actually may give you wiggle room in negotiating the price of the home.

Get a home inspection

Once the seller accepts your offer, you’ll want to bring in an inspector to determine whether the property is mechanically and structurally sound. Your realtor can likely recommend a good inspector, or you can search through reputable organizations such as the National Institute of Building Inspectors, the American Society of Home Inspectors, and the International Society of Certified Home Inspectors.

The role of this professional is to assess every part of the house. Items on that new house inspection checklist include:

  • Condition of the foundation, roof, chimney, and gutters

  • Condition of siding and any exterior elements of the home

  • Flooring, windows, doors, walls, ceilings, stairs, and frames

  • All kitchen appliances and bathroom faucets, pipes, and fixtures

  • Electrical system, including fuse or circuit boxes, outlets, lights, and ceiling fans

  • Heating, ventilation, air conditioning, and water heaters

  • Fire and carbon monoxide detectors

  • Fences, gates, decks, sidewalks, and driveway

  • Yard drainage, septic or sewer system

  • Any leaks or water damage

Budget for extras

You may not need a new sofa or a bed, but there are probably many other things you’ll want or need to purchase, particularly if this is the first time you’ve owned a home. There are the practical considerations like a lawnmower, ladder, or smoke and carbon monoxide detectors, and then there are those extras — a modern mirror to hang above the mantel, an outdoor furniture set for the new patio, or home automation items, such as a smart thermostat and motion-sensing cameras that tie into your home security system. You’ll also want to budget for moving expenses.

Visit the Brinks Home™ Smart Center to learn more about how to buy a new house, the moving process, and home automation.

Jason Stevens is a senior writer for Brinks Home. He is a "tech guy" who enjoys sharing home security and automation tips with others.

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Buying a New House

Understanding the home buying process

BY JASON STEVENS

JUNE 10, 2021

So you’re ready to purchase your first home. Congratulations! That’s a big step. While house hunting can be an adventure, actually buying a new house can seem like a daunting task and a whole lot of money up front. Here’s a list of things you need to consider when kicking off the home buying process for the first time:

Get mortgage preapproval

A mortgage preapproval letter is essentially tangible proof that you can afford to buy a new home. Many sellers will only look at prospective buyers who already have that preapproval letter, particularly in a strong real estate sellers’ market. You’ll have to fill out a mortgage application that includes your employment history, income and expenses, and assets and liabilities. Throughout the preapproval process, mortgage lenders will also pull your credit report. All of these factors determine your home loan type, interest rates, and how much a lender will loan to you. Just keep in mind that mortgage preapproval letters are only good for a finite amount of time — typically 60 to 90 days — in case your finances change.

When searching for a mortgage lender, check online sites, your local bank, or a credit union for the best terms. If you prefer to have a professional find the best interest rates for you, look for a mortgage broker, who acts as a go-between to match you with the right lender.

Determine your price

Before you even begin your search, sit down and calculate how much money you can comfortably spend. Just because you qualify for a $600,000 conventional mortgage loan doesn’t mean you should plan to purchase a $600,000 home. Look at your income, your financial goals, your savings, and any expenses. In addition to a monthly home mortgage payment, you’ll want to factor in property taxes, home insurance, utilities, general living expenses, and any outstanding debt you may have. Also keep in mind the following costs when you close on a home:

  • Down payment: Your down payment is the money you’ll pay toward the purchase price of the home. Experts recommend anywhere from 10% to 20% of the home’s price (20% and above means you’ll avoid extra mortgage insurance added to your monthly balance). Keep in mind that your down payment falls outside of your home loan, meaning if the purchase price of your home is $400,000 and you put down 10%, you’ll pay $40,000 up front and borrow the remaining $360,000 from your mortgage lender.

  • Closing costs: When you close on a house, you incur fees from the title company and the lenders who work on the transaction. Closing costs are about 3% to 5% of the home’s value depending on your area, and you’ll likely want to pay them out of pocket at the time of closing. There are, however, ways to defray those closing costs. You can ask that the seller pays closing costs or you may be eligible for an FHA loan or another home buying loan in your state.

Find a realtor

A real estate agent can help you navigate the entire home buying process. Wondering how to buy a new-construction home or that older fixer-upper? These commission-based agents take you to look at properties in your price range with the amenities you desire. They’ll also help determine the right amount to offer on a home, they’ll assist you with completing paperwork once your offer gets accepted, and they may even be able to alert you to first-time homebuyer assistance programs.

A good first step to finding the right realtor is to ask friends and family for recommendations. Look for an agent who’s a member of the National Association of Realtors, a group that holds its members to a code of ethics. You also may want to interview a few agents before making your final decision. While professionalism certainly is key, you want to ensure you find a realtor that clicks with you and can work within your budget and needs.

Look in the right places

The old “location, location, location” trope holds true. However, where you end up buying is a bit more nuanced than that. Let’s say you found the perfect starter home in a historic neighborhood. Before you put in that offer you’ll want to determine:

  • Whether the neighborhood is safe. Check with other neighbors, join NextDoor to get a sense of the area, or check out an online neighborhood safety tool, such as AreaVibes or CityProtect.

  • What the other houses look like in the neighborhood. That cute 1920s bungalow you have your eye on is a charmer, but the neighbor’s rusted car in the driveway and overgrown grass may not be a great sign, particularly when it comes to neighborhood resale value.

  • How the schools are. You and your partner may not be quite ready to expand your family, but when you do you’ll want to ensure your children will have excellent educational opportunities. Most real estate sites include school zoning information.

  • Which amenities fit (or don’t fit) your lifestyle. Look at what’s around the home. Do you need easy access to a grocery store and pharmacy? Is there a good park nearby to walk your dog? Are you close to public transportation? Is the home a little too close to a railroad track or busy highway for your comfort?

Determine improvements you need to make

Your purchase price doesn’t factor in any renovating you’ll need to do. That urban loft, with its high ceilings and picture-perfect living room brick wall, may be completely move-in ready, but the three-bedroom, two-bath suburban home may need its 1980s carpet ripped out, a new water heater, a kitchen overhaul, a home security system installed, and a fence for the yard. Factor in the cost of renovations before you put down an offer on a new home. A leaky air conditioning unit that needs replacing actually may give you wiggle room in negotiating the price of the home.

Get a home inspection

Once the seller accepts your offer, you’ll want to bring in an inspector to determine whether the property is mechanically and structurally sound. Your realtor can likely recommend a good inspector, or you can search through reputable organizations such as the National Institute of Building Inspectors, the American Society of Home Inspectors, and the International Society of Certified Home Inspectors.

The role of this professional is to assess every part of the house. Items on that new house inspection checklist include:

  • Condition of the foundation, roof, chimney, and gutters

  • Condition of siding and any exterior elements of the home

  • Flooring, windows, doors, walls, ceilings, stairs, and frames

  • All kitchen appliances and bathroom faucets, pipes, and fixtures

  • Electrical system, including fuse or circuit boxes, outlets, lights, and ceiling fans

  • Heating, ventilation, air conditioning, and water heaters

  • Fire and carbon monoxide detectors

  • Fences, gates, decks, sidewalks, and driveway

  • Yard drainage, septic or sewer system

  • Any leaks or water damage

Budget for extras

You may not need a new sofa or a bed, but there are probably many other things you’ll want or need to purchase, particularly if this is the first time you’ve owned a home. There are the practical considerations like a lawnmower, ladder, or smoke and carbon monoxide detectors, and then there are those extras — a modern mirror to hang above the mantel, an outdoor furniture set for the new patio, or home automation items, such as a smart thermostat and motion-sensing cameras that tie into your home security system. You’ll also want to budget for moving expenses.

Visit the Brinks Home™ Smart Center to learn more about how to buy a new house, the moving process, and home automation.

Jason Stevens is a senior writer for Brinks Home. He is a "tech guy" who enjoys sharing home security and automation tips with others.


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