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Did
I miss the lesson in school on mortgages, loans and buying a new house? I must
have been sick that day, because I definitely would have found more use for that
information than I have for derivatives.
Eighteen years of education, 144 classes, and not one gave me the 411 on all this
mumbo-jumbo about finding a place to live. You'd think it would be an important
life skill to teach. Fortunately buying or renting a place to rest your weary
head doesn't take a 427 page textbook to understand.
Once you know what area you would like to live in, the next task is to determine
whether you are looking to rent or buy property. MSN House & Home (houseandhome.msn.com)
provides a helpful tool for determining what is right for you. Through a process
of calculating increases in rent, appreciation and loan information, the site
guides even the most elementary buyer through the arduous task.
In school, your primary resource is your teacher. In real estate, your primary
resource is your realtor. The relationship between a buyer and a realtor is based
on a tremendous amount of trust. A buyer must find an agent with whom they feel
comfortable. This individual handles many of the most important aspects of one
of the largest financial commitments a buyer makes. Finding a realtor who is familiar
with your area is crucial. This provides you with an excellent resource when comparing
market prices of other houses, finding an inspector or looking into homeowners'
insurance policies.
Peter Doolan, of Doolan Realty, advises prospective buyers to obtain pre-approval
for a mortgage prior to contacting a realtor.
"This [a pre-approval] tells the realtor how much house you can afford,"
Doolan said. "You also need to get your credit rating. You need all of this information
for an offer. After that, you come to me with the criteria for the house you are
looking for and I pull properties for you.
Before beginning the loan application process, it is important to gather key financial
documents. Financial information that may be required by your loan agency includes
a copy of the purchase contract; your last 2 tax returns, including Federal W-2
and 1099 forms; pay stubs for the last 30 days; your most recent statement for
all credit card accounts; your coupon book for any outstanding home, auto, school,
or other loans; all bank and brokerage account statements for the past 3 months;
IRA/Keogh/401(k) statements for the past three months; title of any cars you own
that are less than five years old; and a copy of your transcript or diploma if
you have been a student in the last two years. Compiling this information in advance
helps to accelerate the loan process and decreases delays in approval due to incomplete
information.
Paging through every available property within a 20-mile radius can be a very
time-consuming process. Determine what size house you would like and the cost
you are able to afford. You should provide your realtor with this information
when you begin the search process. Narrowing the large number of possibilities
to a smaller pool decreases the tedious task of choosing the perfect place. Influenced
greatly by personal preference, finding the right house is often the biggest obstacle
a buyer faces during the purchase process.
Charlotte Lewis, who recently purchased a new home, spent four months actively
searching for the perfect place.
"We found some places and were interested in them, but within days they were under
contract with other buyers," said Lewis. "Fortunately, that only happened twice.
I've heard of other people who have had that trouble many times. It's tough when
you have a small budget to work with."
Doolan says that the quicker a buyer finds a house they like, the quicker the
entire buying process.
"If you find a house in a couple of weeks, then it only takes a couple of months
[to negotiate a selling price, and close on the house]" he said.
Prior to making an offer on the house you wish to purchase, it is important to
consult your realtor and obtain a comparative market analysis (CMA). This provides
you with information on the selling prices of homes similar to your prospective
house and helps to set your initial purchase offer. After a period of offers and
counteroffers, a purchase offer form will be completed with the assistance of
your realtor. Be prepared to negotiate.
Before finalizing your purchase contract, be certain to include protection contingencies
for yourself. A financing contingency renders the sale of the house invalid if
you are unable to secure a loan. An inspection contingency renders the sale invalid
if a serious problem is found during inspection. If the seller pays to have the
problem fixed, then the contract can still be considered valid. A title-inspection
contingency requires the seller to provide clear title to the property before
the sale is finalized. Once the contract is complete, it takes at least 30 to
45 days to complete the process and close on the house, a time period called escrow.
Once you find the house you wish to purchase, you must secure the fund to pay
for the house. Your first step in applying for a mortgage is to reference your
credit report. Your Equifax, Experian or TransUnion credit report can be found
through a variety of websites. In New Jersey, each resident is entitled to one
free credit report every 12 months. Once you receive your report, it is important
to review it for any blatant errors that may affect your loan eligibility, such
as outstanding debt that has already been paid off.
Once a contract or purchase agreement has been signed, an inspector can be contacted
to conduct a thorough inspection of your new home. Inspector qualification is
important when choosing a reputable inspector for your house inspection. Realtors
will often have suggestions for inspectors they have previously recommended to
other buyers in your area.
Protect your investment and all your hard work by choosing a homeowners' insurance
policy that best meets your needs. Homeowners' insurance generally covers lightning,
theft, fire, smoke, wind, and explosion. Many other natural occurrences such as
flooding, water damage and earthquakes are not covered under a basic policy, but
may be obtained through the purchase of a special policy. It is important to review
your policy options carefully to choose the best plan for you and your geographic
area.
At the closing for your new home, all the final paperwork must be signed. To avoid
the hassle, a buyer's realtor or attorney can complete all closing procedures.
During the one to two hour meeting, proof of insurance and inspection must be
shown, down payment must be provided and the deed to the property will be turned
over. Reviewing all information with your realtor will help ease the process and
speed up your move-in.
Now, you just have to find a way to pay all those mortgage payments and still
afford those vacations to the islands.
Laura de Zutter is a senior communication studies major, with a professional
writing minor.
