Ten steps to buying a home

1. Where do I start?
2. What are the tax advantages of owning a home?
3. What price home can I afford?
4. How much downpayment should I make and where do I get a downpayment?
5. When do I shop for a loan? 
6. Now I can start house hunting!
7. Do I need a Realtor?
8. What should I look for in a home?
9. Steps to take for a successful purchase - making an offer and getting it through.
10. What to typically expect prior to and at  closing.

Step 1: Where do I start?

We suggest you start by thinking about the reasons you want to move toward buying a home.  To have a place of your own?  To begin building equity for the future?  Or, maybe it's time to move up to a larger home or downsize to a smaller more compact abode. 

Now, try to consider the type or style home you would like to buy, where you would like to live, and the size or kind of property that appeals to you.  You may want to think about a new home, an older home or possible a fixer-upper!  It's always a good idea to make a list of your needs and then a list of your wants.  This will be a great help when you begin looking at properties.

Step 2: What are the tax advantages of owning a home?

There are several tax advantages that enter into the picture when one talks about owning a home.  Tax savings begin right from the first day of ownership.  Some of the actual settlement charges paid at closing are deductible on your Federal and State Tax returns when you file your taxes for that particular tax year.  "Points" paid at closing, along with any prepaid interest, and property taxes on the purchsed property are deductible.  Then, interest paid each year on your loan is deductible until you have the loan paid off and so are the annual property taxes you will pay.  Other items may also be deductible, and we suggest you consult with your tax accountant for direction with this when you prepare your taxes annually.

Step 3: What price home can I afford?

The simple answer is how much downpayment do I have and how much can I afford to borrow.  (Always remember to keep back a some funds for move-in expenses and a reserve for emergencies.)  The most frequently used lender's rule is 28 -36% ratio.  No more than 28% of your gross monthly income can be used for housing costs (including Principal, Interest, Taxes (property) and Insurance).  The 36% maximum would cover the maximum allowable including P.I.T.I. above and any debts longer than 10 months; i.e. alimony, other outstanding loans, credit card debt, school loans, child support, etc.  It is important to set down with a Lender to discuss these issues to find out exactly where you are and what you can pre-qualify for before you start looking for a home.

Step 4: How much downpayment should I make and shere do I get a downpayment?

After talking with a lender and getting pre-qualified, you will know exactly how much downpayment you will need to have at closing.  There are some advantages to having a larger downpayment: less mortgage to pay-off, smaller monthly mortgage payments and possible lower interest rates. However, there are also advantages to having a smaller downpayment - less cash out of pocket, a larger interest deduction on your annual income taxes.

There are several options for sources for a downpayment:  A tax-free gift from parents, grandparents or others; cash value in a life insurance policy that could be used; a loan against a company pension plan; cash in a retirment savings account; a company bonus; an inheritance;  or possible business collateral if you own your own business.  Again, this is where your Lender can discuss options with you.

Step 5: When do I shop for the loan?

It's a good idea to look for financing prior to looking seriously for a home. A compentent Relator(c) can help you in locating a reputable lender or two.  It is a good idea to talk with more than one lender when you are ready to look at purchase a home.  There are a variety of loan products out there and some larger banks have different products than smaller banks and private mortgage companies can also have different products that may fit your needs better.  The lender can do a "pre-qualifying" just to give you a good idea of what price houses you should be looking at, so that you are not wasting your time or the Realtor's  (c) time looking at things you cannot afford.  Knowing where you stand also puts you in a better bargaining position when you do find that right house to purchase.

Step 6: Now I can start house hunting!

Remember that list we suggested in Step 1?  Well, this is where it really comes in to play!  When you meet with your selected Realtor (c), be sure you bring that list with you, both needs and wants.  You will share those needs and wants with the Realtor(c)  and discover along the way that those neds and wants may change some as you begin the exciting search process.  The Realtor(c)  will be able to zero in on those homes that are on the market that fit your criteria, whether it be price, needs or wants, and get you starting headed in the right diection. 

Step 7: Do I need a Realtor(c)?

Real Estate Brokers and Realtors(c) are in business to provide service to you implementing nearly every service connected with your home search!  An experienced, full-time Realtor(c) can possibly save you money in the process of purchasing and closing on the property you finally select.  All real estate agents are bound by law to deal fairly and ethically with both buyer and seller.  You may choose to work with a buyer's agent, whose legal obligation would be to work only for you, the buyer, negotiating sales price, terms and conditons on your behalf.  Real estate agents will help you with the loan process, personally conduct the search with you to locate the home that fits your needs and wants, help you prepare the offer to purchase and guide you through that process, assisting you right up to settlement on your new home and beyond should the need arise.  The experienced, full-time real estate agent, or Realtor(c) can eleviate a lot of heart-burn and confusion.

Step 8: What should I look for in a home?

Look for the features that you need first.  Then look for the features you want.  Do you need a first floor Master Suite?  Do you need a 2 car garage?  Is there a style home your prefer?  Do you need to be close to work?  Do you prefer new construction?  Then:  Do you want fenced yard?  Or perhaps a pool in your yard?  Do you want a basement?  Pit or walk-out?  Do you want privacy?  There are so many things to consider and it is not something that should be decided without careful consideration.

Step 9: Steps to take for a successful purchase - making an offer and getting it through!

You've found the property that you feel you want to purchase to make it your home!  Now it's time to ask your Realtor (c) to create the paper work for making an offer on the property.  You determine what you want to pay for the property based on what you've seen and what the property is being marketed for.  Your Realtor (c) will be happy to present the offer.  Remember, that your Realtor(c) is a professional and is an invaluable source for helping you through the entire process.  The Realtor(c) will write up the offer and present it either to the other agent (if the home is listed) or to the seller.  It may be readily accepted or it may be countered back to you for other terms or conditons.  Finally, after all have agreed and signed, initialed, dated and approved  - the contract is a legal binding agreement between seller and buyer.