Buying a House

Buyer's Guide

  • Before you start looking for a home you should ask yourself a few questions.
  • What community would you want to live in?
  • Would you like to be close to schools, shopping, or your place of business?
  • What kind of house would you like?
  • Are you looking for a particular style?
  • How many bedrooms and bathrooms do you want?
  • Do you want a yard or acreage?
  • How much house can you afford?
  • Have you consulted a REALTOR® or mortgage lender to determine the size of the mortgage you would qualify for?

Get Organized

Browse through real estate advertisements in the newspaper and on-line. This will give you a good feel for the homes that are on the market and what they cost.

Visit open houses on the weekend. It doesn't cost anything to look, and looking at different homes might give you an idea on what you'd like in a house but haven't considered.

Start saving money - you'll need to have cash on hand for a down payment and closing costs.

Pull a credit report on yourself and make sure the information is accurate. If you find any errors, take steps to correct them immediately. Don't incur any additional debt. Pay down your credit cards - and don't apply for any new ones. Don't make any major purchases on credit cards

Contact a REALTOR®. Your REALTOR® can help you determine how much you can afford, and will provide you with information on homes that may interest you. The REALTOR® will also help you complete all of the necessary forms when it comes time to make an offer. Check on-line for a REALTOR® in your area. Realtors in Albany are knowledgable in all aspects of real estate pertaining to that area, while a REALTOR in Northern Warren County would have more expertise for that area.

How Much House Can You afford?

Simply put, you can afford a house that costs as much as the largest monthly mortgage payment you qualify for.

A quick way to estimate the size of mortgage you qualify for is to take your gross monthly income (that's before taxes and other deductions) and multiply it by .31. This works out to just under 1/3 of your gross income.

Mortgage companies use something called qualifying ratios to determine how much they'll lend you. Most mortgage companies use either a 31/43 ratio. The first number in each pair is the percentage of your gross income that the lender would consider acceptable as a monthly mortgage payment (i.e. if you make $3,000 per month, 31% of that is $930 per month).

The second number in each pair is used when all debt payments are considered, not just the mortgage. (i.e. if you make $3,000 per month, but also have a $250 a month car payment, 43% of $3,000 is $1,290, minus the $250 car payment equals $1,040).

As you can see, in this example the numbers work out to be almost the same. Obviously if you have more debt you would qualify for less.

Why you should work with a REALTOR®

Working with a professional REALTOR® to buy your home is a good idea for several reasons:

A REALTOR® will analyze your financial situation to help you determine how much you can afford.

A REALTOR® is familiar with the process of buying a home and can explain things to you.

A REALTOR® can easily access information on all properties listed for sale by other REALTOR®s in your area.

A REALTOR® can set up appointments for you to see homes that are of interest you.

A REALTOR® can help you complete all the necessary paperwork when it comes time to make an offer.

A REALTOR® can help you arrange financing.

A REALTOR® will be there at closing to answer your questions and make sure everything runs smooth.

Choosing A Realtor

When you decide to purchase a new home you will need the help of many people from different disciplines. You may need a real estate attorney and an agent or a broker. Unless you completely understand what is involved and required in the purchase of a new home, it is difficult to complete without one of these professionals. Since most people spend a fair amount of time with their REALTOR®, it's important to choose a REALTOR® you feel comfortable with, and one who is responsive to your needs. The following questions will help you decide if a particular REALTOR® is right for you:

Do they return your phone calls?

Do they ask you questions to determine what you want and need in a house?

Do they perform a financial analysis to help you determine how much you can afford?

Do they explain things clearly?

Do they educate you on financing methods?

Do they seem knowledgeable about the community?

Do you feel comfortable spending time with them?

Making An Offer

Congratulations, you have searched high and low and found a home you would like to live in and can afford. Your head will be full of ideas of what price to offer, what contingencies you want included with the offer, what personal property you would like included in the sale and many, many more.

So what are the next steps you need to make to try to secure this home?

You will need to make an offer. An offer is a legally binding contract, which must be in written form. Verbal agreements are not sufficient. If you are in doubt as to the meaning of the contract, consult your attorney and seek his legal counsel. Your agent should be able to help answer many questions and will complete the purchase contract for you. Real estate laws differ in different states. The contract format and what's included will differ also.

Remember to be specific and include everything in the contract. If you leave something out, the seller is not obliged to include it in the sale. For example, if you want the window air conditioning units to be included in the sale, include this in the contract. If the seller verbally agreed to do this and you move in and find no air conditioning units in the windows, you will have no recourse.

What is a home appraisal?

A home appraisal is an independent valuation of a home to determine its market value.

A home appraisal is generally organized by the lender and is usually paid for by the buyer. All loans require an independent appraisal. The reason the lender requires an appraisal is that you may think a home is worth more money than it really is. You make an offer based on that assumption but if the appraisal leads the lender to believe the home is overvalued, the lender may feel this is a risk and may not grant you a mortgage. Basically the lenders want to protect themselves by ensuring the property is worth its market value. The appraisal helps assure the buyer does not end up having negative equity on the home

Inspections

The Home Inspection

You’ve made the big decision to move or relocate. You are considering buying a home you have seen. The home looks well maintained and in good working order to the eye but how do you know there isn’t something seriously wrong with this home? The plumbing or sewer system may not have been properly installed or the electrical system may not be wired correctly. What if the structure of the home has a major fault? This is where the home inspector comes in.

An inspector is a person who examines all systems and components of a home in accordance with the ASHE standards of practice. It is not advisable to try to cut costs by skipping on the inspection. This is money well spent and paying someone to inspect the home now may prevent many more dollars being spent in the future on resolving issues that would have been highlighted during an inspection. When writing up a contract, it is always advisable to have the offer contingent on an inspection. It is recommended to get the inspection completed as early as possible. Do not to leave it to the last minute so you have ample time to work with the seller on any issues that have come to light from the inspection. Once the offer has been accepted by the seller, the buyer is required to have the inspection completed within five to ten days after this date.

Pest Inspection

Most pest inspections can be done by the person who performs the structural inspection. If pests are found, you must have proof that the house has been treated and that any pest damage has been repaired. This is usually the seller’s responsibility.

Other inspections could include:

  • Radon
  • Lead paint (if house was built prior to 1978)
  • Septic
  • Water

The Closing

Once the offer is accepted and the seller has signed the offer-to-purchase contract, you are well on your way to owning the home. The next major step to complete the transaction is what is known as the real estate business of the closing. The closing or settlement as it is also known is the final step in the transaction. From the time the offer is accepted to the closing date, there is much work to be done.

The following will need to be completed by closing:

  • Obtain financing
  • Home inspection
  • Home appraisal
  • Title search
  • Home Insurance obtained
  • Title Insurance obtained
  • Final Walkthrough