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First Home Buyer Needs Self Education
Any first home buyer is at a great disadvantage seeking a mortgage if time is not taken to understand all the necessary aspects toward obtaining a loan successfully. To find the most favourable deal possible, it is important for a first home buyer to do a good deal of investigation and research that will provide them with the necessary knowledge to make an informed decision. Although a first home buyer can call upon the experience and knowledge a professional broker provides, it is still dependent upon the consumer to do some self educating as well.
Preparation in Advance Securing a mortgage for a first home buyer starts many years before actually needing to buy a home. A first home buyer has to be as attractive a prospect as possible to make sure that this very important loan is approved. In order to be as attractive to lenders as possible, a first home buyer must establish and maintain a positive credit rating in the mid 700s, or higher, to even be considered by a mortgage lender. Establishing rotating credit accounts such as credit card, petrol and retail store accounts and paying these on time will help to establish credit worthiness. Living a product life as an ideal credit consumer will prepare a first home buyer for mortgage approval when the time arrives to buy a home.
Down Payment Always Needed Unless you have financed, sold and financed a home more than once, expect to be required to make a down payment anywhere from 10 to 20 percent of the total home purchase. While preparing for that time to come, conducting positive personal finance management will provide a first home buyer with the necessary history mortgage lenders seek.
Deciding What Can Be Affordable Mortgage lending decisi0ons for first home buyers take into consideration examination of all personal finances to determine the amount of monthly repayments a consumer can afford. A good rule of thumb is a monthly mortgage repayment, insurance and taxes should not be more than what a first home buyer experiences paying rent. Since other monthly expenses such as utility, food, transportation and other living expenses may not change drastically, assuming a mortgage repayment should be possible if it does not exceed a current rent payment.
Seek Pre-Approval All first home buyers should seek mortgage pre-approval prior to searching for a house. This allows a consumer the opportunity to start a process toward home purchase by allowing the lender to examine personal credit worthiness establishing a pre-approved purchase amount. Let the amount the lending institution is willing to “risk” on a first home buyer direct the house search. If that number is not sufficient, certain actions such as coming up with an additional down payment may be necessary to qualify for a larger amount.
Motivation for Action Any first home buyer that has a pre-approval from a lending institution can engage the services of a real estate professional who has a firm understanding off the financial limits that will direct what properties are show, Buying a house is an important step so spending time looking at properties that a first home buyer cannot afford is wasteful.
Although many first home buyers are looking for that “dream” home, choice may be limited in reference to size, type and place for that very first real estate purchase.
The Real Estate Purchase Agreement
Buying any piece of real estate property whether it be a home, condominium or building requires a written agreement. This is known as the real estate purchase agreement or a sales contract. It is called for in the U.S. Statute of Frauds that all financial transactions involving real estate be put in writing to be enforceable.
A purchase agreement is entered into by two parties the buyer and the seller. Being the principals in the transaction, both of their names and signatures should appear on the document.
Other important details that need to be specified in the contract include the following:
* Legal description and address of the property. This should state the physical condition of the home and its specific location.
* The purchase price the buyer is offering.
* The amount of down payment also referred to as earnest money or deposit and who will keep it during the transaction. Usually, a lawyer acts as the escrow agent. A condition may be included as well stipulating the return of the deposit if the sale does not push through due to the buyers failure to secure a loan.
* The time frame needed to respond to the offer such as 24 hours or 48 hours. The buyer may specify this to keep the seller from accepting additional bids from other buyers.
* The party in charge to keep the deposit and to close the transaction. The closing may be handled by either the attorney or the real estate agent whichever may be agreed upon by the two parties.
* Items included or excluded in the sale. These refer to the appliances and furniture that the buyer may want to keep or discard in the property concerned such as carpeting and lighting fixtures.
* Home warranty. This guarantees the buyer that the seller will provide a clear title to the property at the time of closing. The document may either be an abstract of title, certificate of title or a title insurance policy.
* The party to pay for the closing costs. Many sellers shoulder the closing costs as an incentive to buyers. Depending on both parties, though, the costs can also be split.
* Clause for inspection and appraisal. Buyers normally ask for a home inspection to ensure that the property they are buying is in good condition. The inspection also aims to find out defects and the presence of pests, if any. The appraisal, meanwhile, is meant to determine the actual market value of the residential property.
* Mortgage contingency. This may be specified by the buyer as a guarantee that the buyer obtains a mortgage loan before closing. This may also release the buyer from the offer in the event he or she fails to get a loan.
The real estate purchase agreement is initiated by the buyer. However, its not all the time that the seller accepts the offer in its totality right away. What usually happens is that a seller will respond by submitting a counter offer that proposes some changes to the buyers conditions. Negotiations will begin only after the buyer and seller agree to the contracts terms and conditions.