What the first step of the home buying process?

Getting pre-approved for a mortgage is the first step of the home buying process. Getting a pre-approval letter from a lender get the ball rolling in the right direction.

Here’s why:

First, you need to know how much you can borrow. Knowing how much home you can afford narrows down online home searching to suitable properties, thus no time is wasted considering homes that are not within your budget. (Pre-approvals also help prevent disappointment caused by falling in love unaffordable homes.)

Second, the loan estimate from your lender will show how much money is required for the down payment and closing costs. You may need more time to save up money, liquidate other assets or seek mortgage gift funds from family. In any case, you will have a clear picture of what is financially required.

Finally, being pre-approved for a mortgage demonstrates that you are a serious buyer to both your real estate agent and the person selling their home. Most real estate agents will require a pre-approval before showing homes.

How does a real estate agent get paid?

If you are looking to buy, you pay your agent NOTHING to represent you. Their commission is paid through the selling party. Traditionally, the seller pays the seller’s agent and the buyer’'s agent commission.

What is earnest money?

When you make an offer on a home, your agent will ask for a check to accompany it (checks are the same as cash, and the deposit is typically 1% to 2% of the purchase price). Earnest money is made in good faith to demonstrate - to the seller - that the buyer’s offer is genuine. Earnest money essentially takes the home off the market to anyone else and reserves it for you.

The check (or sometimes cash) is deposited in a trust or escrow account for safekeeping. If a deal is struck, the earnest money is applied to the down payment and closing costs. If the deal falls through, the money is returned to the buyer.

Important: if the terms of a deal are agreed upon by both parties, but then the buyer backs out, the earnest money may not be returned to the buyer. Ask your agent about the ways to protect your earnest money deposit and the ways to protect it – such as offer contingencies.

How much do I need as a downpayment?

20% is always recommended as a downpayment, but don’t let that discourage you. There are other financing options to achieving your goal of home ownership. Whether you use a conventional loan or FHA loan, a downpayment can consist of as low as 0% down. Connect with your local lender to learn more.

Should I sell my home in today’s market?

Great question. First, let’s complete a free market analysis on what your home could sell for in today’s market. I can also provide multiple net sheets to see how much you would be able to profit from your investment. Having the necessary steps and data will help you make an educated decision. My job as the selling agent is to represent you on your behalf to make sure you net the most from your largest investment.

Should I buy or continue to rent?

Buying a home can be a very solid investment. It actually can be cheaper to pay a mortgage than paying rent. Owning a home can give you a sense of pride, the ability to invest in yourself, and being able to lock in a monthly payment rather than dealing with rent increase. Home ownership essentially allows you to pay yourself every month (you build equity in your home), rather than paying someone else. There are also great tax benefits from owning a home.

This being said, renting can also be a better option for some, depending on the circumstance and someone’s long term goals.