The Conventional Way to Buy a Home
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The Conventional Way to Buy a Home
Buying a home is something most people do at least once in their lifetime. Many people dream of buying their own home. The amount of new homes has grown tremendously and many people are buying houses. The median price of homes in California is approximately $500,000. The conventional way of buying a home is a procedure that takes a lot of time and patience. There are a few steps and procedures that are included in buying home. It includes getting pre-qualified by a loan agent to determine the maximum dollar amount of mortgage you can truly afford (real important step in the process), seeking a realtor, searching for homes, making offers, hiring a title company, an appraiser, home inspector, termite company and opening and closing escrow and other various services that benefit both buyer and seller. Buying a home is a complex process and most consumers do not know where to start and lack the education in regards to it.
Buying a home is more complex then most think. A purchaser of a home doesnt pay in cash when buying a house. If that were so, then nobody would be able to afford one. A potential buyer must get a loan. The bank doesnt lend their money to just anybody, so there are prerequisites before a buyer should consider buying a home. The potential buyer must have enough money for a down payment which is 3% to 20% of purchase price, a steady job with for at least two years or more, must have a decent credit score with at least a 640 or better. That is standard for the market. (1) The credit score is based on the FICO score. FICO stands for, Fair Isaac Corporation, a company that has been in business since the early 1950s and monitors consumers credit ratings and put a scoring system on it. (2) Conventional loans are usually financed up to eighty to ninety percent with a down payment required of ten to twenty percent. The potential buyer must also have a debt ratio not exceeding 28/39 of their income. The first number 28 refers to your new mortgage payment that cannot exceed 28% for your gross combined income and 39 refers to your mortgage payment plus revolving and installment debt as well as taxes and insurance cannot exceed 39% of you total combined gross income (3).
The first step is to be pre qualified. The question should never be what kind of home the buyer is looking for, rather the question the buyer should and seek from a professional loan agent would be, “What can I afford?” This is the first step that a wise consumer should take rather than seeking the direction and advice from a realtor which is the usual path that the typical consumer initially takes, unless that realtor is very experienced and has a lender that he or she already works with and refers the buyer to that individual initially. A person must get pre-qualified by a competent loan agent. A buyer must always meet with a loan officer first so he or she can have an idea of what they can truly afford considering their financial situation. A buyer may find a loan officer by going to the bank looking through the local yellow pages, surfing the net or maybe a referral by a friend that has experienced the loan process. The loan agent advises the potential buyer of the available terms and conditions of what he or she can afford. Once he or she is qualified for a loan, a pre-qual letter is given to the new prospective home buyer and sent off or in most cases referred to a competent realtor.
Once acquainted with a competent realtor, also known as a real-estate broker the buyer should interview and question his or her experience. He or she should be a person who assists buyers by helping them purchase property for the best possible price under the best terms (4). Realtors may also be found by the posted signs found in front of homes for sale. Quality of a good realtor would be open, interested, relaxed, confident, and qualified. Keep in mind, you should find one that you get along with. For this person will be helping you find your most important investment. After the buyer discusses what he or she is looking for in a home, the realtor goes into the MLS (multiple listing service). The MLS is a data base that selling agents post their clients homes into. The MLS shows the realtors all the houses in the area that fits the criteria that the buyer is looking for. The realtor presents to homes to the buyer. The realtor takes the buyers on a tour of the homes that he finds on the MLS. The realtor opens up the house and shows the buyers the house using a lock box that is placed on each home that is listed on the MLS. A lock box is a device that holds the keys to the home inside and cannot be retrieved unless they have an appointed computerized key. This computerized key is used in the industry to ward off theft by keeping computerized data stored and tracking the realtors identity, time of entry and time of exiting. Once the right home is chosen by the buyer, then they can move on to making an offer to the seller. Getting a realtor isnt always necessary, but for the first time home buyer it is a smart and prudent thing to do. Realtors are usually paid for by the seller. Realtors make their money off of commission and usually charge a standard rate of 6% of what the house sold for and is usually split between buying and selling agents. It is the realtors job to make sure that the buyer finds the home that is perfect for them. Once the realtor finds the buyer a home that they interested in, it is time to make an offer.
The other duties that the realtor must do is with is making a proper offer and presenting it to the seller once the buyer has agreed to do so. It is up to the buying agent to put together an offer that will be the lowest and best possible price the buyer can purchase for and for the seller be willing to accept. The offer should be between 5% and 20% of the price of the house. The offer must be a mutual beneficial transaction,