Things To Know When Buying a House
So you have made the decision that maybe a home purchase is in your future... what do I need to know?
1. The most important ~ seller's taking you seriously, it's very important that you're prepared to not only put your best foot forward, and most importantly to ensure that you are committed and prepared to make a home purchase. Sellers will expect that you are 100% financially prepared, they will want to immediately see a preapproval letter accompanied with an earnest money check with your offer.
A preapproval letter can be obtained by meeting with your credit union, or banking institution, you can get started here, quick and secure, or by requesting more information, this will ensure a secure and fast response. The earnest money is also another very important step, this money is to show your earnest or 'intent' to see the transaction through. This money will be submitted with your offer, should the offer be accepted this money will be deducted from the fees that you will pay at closing. I have more information in the short video on earnest money. It's important to have these funds readily available, should your offer be accepted these funds will be cashed in a matter of a couple days. A friend or family member can help you with these funds but be careful how the funds are transferred and consult with your lender to ensure they can be used. This is considered as 'gifting' and should be documented properly so consult with your lender before accepting or exchanging any funds. Not doing this properly could cost you the home you love.
2. Unexpected Fees - Buying a home is typically the most expensive purchase that you will make. Planning accordingly and looking into the financial aspects of the purchase can save you a lot of frustration and anxiety when it comes to making the purchase. Here are the things you should expect to pay for:
- Earnest Money
- Inspection Fee
- Closing Costs
I touched on the earnest money in the 1st paragraph, but you will expect this amount to be roughly 1%-5% of the purchase price. As I mentioned this money will need to be available immediately as these funds will be cashed as soon as your offer is accepted.
The appraisal fee is typically an upfront free, which your lender will collect from you prior to the appraisal on the property. This amount can vary, but you will want to expect $400-$500 (depending on your area).
The Inspection fee, any Professional Realtor® representing you in your home purchase will encourage you to complete a home inspection. The home inspection ensures that your home is safe, and will point out flaws, upcoming potential expenses and will give you a clear idea of how the current or previous owners have kept the home. This is your opportunity to cancel the purchase agreement without penalty should the home not be as safe and secure as you originally thought. The buyer's inspection can include your basic home inspection, or you can get into detail with other inspection such as a sewer inspection, electrical or heating inspection or, a radon inspection. The fees for this again vary, depending on your area and the inspections that you are requesting. Your basic home inspection will roughly be $400-$600, this will be an upfront fee as most inspectors will need to be paid at the time of service.
Downpayment fees will depend on the type of loan that your lender sees fit for you. There are many loan programs that offer differing downpayment amounts. If you're looking for a first time home buyer loan, which is referred to as an FHA loan, 3.5% is typically requested to close the loan. Downpayment fees will be calculated and will be payable at the actual close date. These funds are typically in the form of a cashier's check that you will want to get a day or two before closing. Other loans vary, a conventional loan is usually a 2nd home purchase or can be a first time purchase with the proper amount down. These percentages range from 3-20% down depending on the interest rate you want. The more money down, typically the better interest rate you will receive. There are programs out there that will help you with down payment assistance, these are in the form of a grant that can be paid back during your homeownership, or when you sell the home (which is the typical choice), should you be interested in this information please call me directly, as sometimes old or misleading information is found online. 612.807.4858
Closing costs also vary, this is another expense that will be expected of you at the time of closing. Depending on your area, these fees can sometimes be requested from the seller to pay on your behalf. Closing costs are typically 3% of your loan amount if you are asking the seller to pay these, anything over that 3% will be your responsibility at the time of closing. This is another reason to find a great Realtor to ensure that you are not paying things that can be requested from the seller.
3. Your Realtor® Does Matter! - Purchasing your 1st home is not a time to use an agent on their first transaction, although yes, every real estate agent needs to start somewhere to get experience. Buying a home the first time or anytime has a lot of steps with financial ramifications, it's important your agent knows the steps to make sure you're not overpaying or getting yourself in a legal financial bind. Research a local expert, take notice of the names you see multiple times in your neighborhood or area, or you can always ask a friend or family member for a referral for someone they have used. That way you can ask them about the experience so you know they are knowledgeable, experienced and will be a great help in navigating you through the home buying process with the least stress as possible!The great news, if you're purchasing a home in Minnesota chances are your Real Estate agent will cost you a very minimal fee somewhere between $350-$500. This is not a get what you
The great news, if you're purchasing a home in Minnesota chances are your Real Estate agent will cost you a very minimal fee somewhere between $350-$500. This is not a get what you pay, for instance, a lot of Real Estate Brokerages charge differing fees for their services, but a higher fee does not guarantee you're getting a more experienced or better agent, so ask what their fees are to represent you. Also, note this fee is not upfront, it will be part of your closing fees payable at the time of closing and if you're requesting the seller to pay 3% towards your closing costs, sometimes this fee can be hidden in those fees and not paid by you at all.
Why is a buyer's agent so cheap? It's because the seller is paying the commission for the agent that represents the seller AND the agent that is representing you. Now there are some technicalities in there as with anything, that could cause you to pay a commission to your agent (which is 2.7% of the purchase price), this is typically when you would purchase a for sale by owner listing or non-MLS listing. An experienced agent will negotiate the commission with a FSBO seller first so ensure your agent is an experienced negotiator.
4. Perks of Homeownership - if you're currently renting, you're still paying a mortgage, it just happens to be your landlord's mortgage... when you are your own landlord you can expect to reap the benefits of any home improvements that occur during the time of ownership, it's referred to as equity. While you're paying down your mortgage most homes are also gaining in value, the gap between what you owe on the mortgage and now what the home is worth is a financial asset to you (equity), when you sell the home, this money can be used as a downpayment on your next home or to pay off bills or other things. The main point is this is a financial asset to you for the future.
Pride of Ownership typically lacks when you are renting, maybe you don't care for the property quite as you would if it was yours, owning your own home gives you something to be proud of. You may find yourself updating, upgrading or paint to make things look nice or to "make it your own." This is usually not the same as a rental property.
Tax benefits - specifically you will need to speak with your individual tax preparer, but fees associated with a new home purchase are tax deductible, and as you own your home and make payments some of those fees can be deducted from what you owe at the end of the year.
Thank you for visiting my blog, Heidi Herda Real Estate, "Things To Know When Buying a House!" I hope that you found this article helpful. Should you want to get started with The Herda Home Team, please contact us now at 612.807.4858 or via email at HerdaHeidi@gmail.com ~ Search now, and sign up for your new home property alert, so you know the second your perfect home hits the market! #homebuying #herdahometeam #champlinrealestate