Buying a home will likely be one of the biggest purchases anyone makes in his or her lifetime. Therefore, here are the most important categories for those looking at buying a home:
Finding an Agent
A good agent is knowledgeable about the current marketplace; he or she will know what is available and what price is reasonable to pay for a property. An agent’s knowledge of the neighborhoods and the local economy is also important when selecting who will represent a buyer in a transaction. An agent who acts as your advocate is extremely important; this will help buyers avoid making costly mistakes in the home buying process. In addition, an agent needs to be reachable and responsive to his or her client’s needs. An agent who is knowledgeable about the market, economy, and a buyer’s specific wants and needs is the best person to find the best possible property for the best possible price for the buyer.
The Loan Process
The starting point of any home search is to find out what the buyer is qualified to spend, and then decide what the buyer feels comfortable with regarding a monthly payment.
Buyers should obtain a pre-approval letter from their bank or mortgage lender. This letter requires a credit check and verification of employment, as well as assets and debts. This gives the borrower (or buyer) a written commitment to borrow funds. A buyer that submits a pre-approval letter with an offer is in a much stronger position to negotiate than a buyer that submits just an offer.
Lender Checklist: What You Need for a Mortgage
- Copy of your past two years tax returns and W-2 forms
- For self-employed, copy of your current YTD Profit & Loss statement
- Copies of two pay stubs for each person signing the loan.
- Copies of two months of bank or credit union statements for both checking and savings accounts.
- Copies of your past two years Tax Returns
- Copies of brokerage account statements for two months.
- Copies of your last quarterly most 401(k) or other retirement account statement.
- Documentation to verify additional income, such as child support or a pension.
Now you are ready to meet with a mortgage banker!
Loan payments typically include the following:
Principal (P): The actual amount paid for the home amortized over a period of time
Interest (I): The interest charged for borrowing the principal. The amount of interest on a loan is higher when the loan is new (thus the principal is lower), this ratio reverses as the loan gets closer to maturity.
Taxes (T): Taxes are collected on a monthly basis and are usually included in what is called an escrow account. Taxes are typically paid directly by the lender but are included in the monthly payment.
Insurance (I): Much like taxes, insurance is collected monthly as part of the mortgage payment, and is then paid by the mortgage company.
5 Common First-Time Home Buyer Mistakes
- They don’t ask enough questions of their lender and end up missing out on the best deal.
- They don’t act quickly enough to make a decision and someone else buys the house.
- They don’t find the right agent who’s willing to help them through the home-buying process.
- They don’t do enough to make their offer look appealing to a seller.
- They don’t think about resale before they buy. The average first-time buyer only stays in a home for four years.
10 Ways to Prepare for Homeownership
Especially in this market, cannot emphasize enough to my prospective buyers that the absolute first step towards purchasing a home is to be pre-approved by a local lender. This allows the buyer to really get a feel of purchasing power and the affect of interest rate changes on purchasing power. Read below for other suggestions.
- Decide what you can afford. Generally, you can afford a home equal in value to between two and three times your gross income.
- Develop your home wish list. Then, prioritize the features on your list.
- Select where you want to live. Compile a list of three or four neighborhoods you’d like to live in, taking into account items such as schools, recreational facilities, area expansion plans, and safety.
- Start saving. Do you have enough money saved to qualify for a mortgage and cover your down payment? Ideally, you should have 20 percent of the purchase price saved as a down payment. Also, don’t forget to factor in closing costs. Closing costs — including taxes, attorney’s fee, and transfer fees — average between 2 and 7 percent of the home price.
- Get your credit in order. Obtain a copy of your credit report to make sure it is accurate and to correct any errors immediately. A credit report provides a history of your credit, bad debts, and any late payments.
- Determine your mortgage qualifications. How large of mortgage do you qualify for? Also, explore different loan options — such as 30-year or 15-year fixed mortgages or ARMs — and decide what’s best for you.
- Get preapproved. Organize all the documentation a lender will need to preapprove you for a loan. You might need W-2 forms, copies of at least one pay stub, account numbers, and copies of two to four months of bank or credit union statements.
- Weigh other sources of help with a down payment. Do you qualify for any special mortgage or down payment assistance programs? Check with your state and local government on down payment assistance programs for first-time buyers. Or, if you have an IRA account, you can use the money you’ve saved to buy your fist home without paying a penalty for early withdrawal.
- Calculate the costs of homeownership. This should include property taxes, insurance, maintenance and utilities, and association fees, if applicable.
- Contact a REALTOR®. Find an experienced REALTOR® who can help guide you through the process
7 Reasons to Own Your Home
- Tax breaks. The U.S. Tax Code lets you deduct the interest you pay on your mortgage, your property taxes, as well as some of the costs involved in buying your home.
- Appreciation. Real estate has long-term, stable growth in value. While year-to-year fluctuations are normal, median existing-home sale prices have increased on average 6.5 percent each year from 1972 through 2005, and increased 88.5 percent over the last 10 years, according to the NATIONAL ASSOCIATION OF REALTORS®. In addition, the number of U.S. households is expected to rise 15 percent over the next decade, creating continued high demand for housing.
- Equity. Money paid for rent is money that you’ll never see again, but mortgage payments let you build equity ownership interest in your home.
- Savings. Building equity in your home is a ready-made savings plan. And when you sell, you can generally take up to $250,000 ($500,000 for a married couple) as gain without owing any federal income tax.
- Predictability. Unlike rent, your fixed-mortgage payments don’t rise over the years so your housing costs may actually decline as you own the home longer. However, keep in mind that property taxes and insurance costs will increase.
- Freedom. The home is yours. You can decorate any way you want and benefit from your investment for as long as you own the home.
- Stability. Remaining in one neighborhood for several years gives you a chance to participate in community activities, lets you and your family establish lasting friendships, and offers your children the benefit of educational continuity.
Move in Contact Info:
Northwestern Energy: 1-888-467-2669 (electric and gas)
City of Bozeman: 406-582-3200 (water/sewer/trash within city limits)
City of Belgrade: 406-388-3760 (water/sewer/trash within city limits)
Optimum/Charter: 866-573-9917 (Cable/High-Speed Internet)
Century Link: 855-874-6242 (Phone Line/Internet)
Allied Waste: 406-586-0606 (Trash outside city limits)
Post Office Keys: Bring purchase documents to 2201 Baxter Lane for Bozeman, or 96 N Weaver Road for Belgrade