If you’re in the market to buy a home, you should understand how the mortgage rate affects your ability to afford a home and watch mortgage rates carefully.
Mortgage Rates
A mortgage rate is the interest rate you pay on the money you borrow to buy your house. A lower mortgage rate makes homes more affordable because it costs you less to borrow money, which in turn increases your purchasing power (the financial ability to buy the home).
A Lender will set a mortgage rate for each person based on several personal factors, such as your credit score and they will review your finances to see how much you can afford to buy. Your income, other existing debt and expenses, credit score, current mortgage rates and other closing costs are all factors in determining what you can afford.
Down Payment
Typically, buyers put down 5% to 20% of the purchase price but this can be as little as 3%. Buyers putting down less than 20% are required to pay Private Mortgage Insurance (PMI) monthly until they build up 20% equity in their home
Buying a home is likely one of the biggest decisions you will make in your life and taking out a loan is a common way to finance the purchase.
After you have selected your lender, you will need to secure a pre-approval letter from the lender and starting working on applying for your loan.
Pre-approal letter simply states how much your lender is willing to lend you and it is often given to sellers as part of an offer to provide assurance you will qualify for a loan to purchase their property.
Your realtor works with you here on finding the right property for you. This includes signing you up for multiple property alerts, watching new listings daily, reaching out to FSBO and scheduling showings.
Making the Offer.
Once you find a property you are interested in buying, your realtor will put together an offer for you and advise you on strategies to use that may up your edge to get the offer accepted faster or if there is a multipl offer situation.
Offer Steps
Writing up the Offer
You realtor will write up the offer and advise you on the most crucial aspects of it such as amount of earnest money down, offer amount, closing date, inspections, personal items and much more.
In your written offer, you and your realtor will discuss any contingencies such as appraisal, home and septic inspections or surveys.
Submitting the Offer
Your realtor can help you determine a fair offer price based on recent market conditions and sale and advise you on other things such as closing date, contingencies and transfer of any personal possession and much more.
Negotiating the Offer
The Seller may counter the terms of your offer and you and your realtor may go back and forth several times. You realtor will be there to adivse you and counter offer terms and conditions and to discuss other options.
Finalizing the Contract
When the whole offer is complete signed by both the buyer and seller the property is officially under contract (pending).
Once your offer is accepted, you will get it immediately to the bank so they can order the appraisal. Additionally, your and your realtor with order any inspections that need to be done. This includes home, septic and well water test and others.
If the inspector finds issues, you can work with the seller to determine if they should be repaired or you have the option to renegotiate the sales price, require the seller to make repairs, or back out of the offer.
Homeownerhsip is right around the corner, but first you will need to address all the details and close the deal.
Closing, also called settlement, is meeting with the title company to sign the closing documents and make your down payment. You will need to secure your closing funds, conduct a final walk through of the property with your realtor and then sign the closing documents.
Three days before your closing date, you will receive your closing disclosures, which details the of the costs to secure a loan and purchase the property.
After the Seller has received payment and signed the deed, you will officially own the property. CONGRATS!!! Next step is to secure possession and transfer any utilities if need be.