Home Buyers Guide to Real Estate
Despite the housing crisis back in 2008, studies have shown that a majority of citizens still consider owning a home part of the American dream. Owning your own home offers a number of unique benefits, both financial and social, and the Bay Area real estate marketremains as hot as ever.
However, buying a home can be a long and complex process. Many prospective homebuyers find themselves overwhelmed by all the professionals and the legalese that they have to deal with. That is why we have assembled this page as a beginner’s guide on how to buy your own home.
HIRE A REALTOR
While it seems like we are tooting our own horn here, having an experienced real estate broker is really the only way to navigate this red-hot Bay Area real estate market (especially if this is your first home).
Think of real estate brokers like the counselors who will guide you through the home buying process. They will interact with all the professionals involved in any real estate transaction: home sellers, lawyers, bankers, home appraisers, escrow agents and more. They can also connect you to a wider range of home sellers, potentially opening your eyes to a dream home that would have slid by unnoticed.
While some people lament the extra cost, having a real estate broker gives you peace of mind, and the small amount you spend on commissions will be nothing compared to the cost of making a mistake on your mortgage documents, or missing out on a killer listing.
ESTABLISH A PRICE RANGE
Before you start looking for a home, you need to figure out what you can realistically afford to pay. Paying off a house through standard home loans is a serious commitment, and you can easily lose your home due to unforeseen costs (maintenance, zoning compliance) and circumstances (job loss, insurance problems, title challenges, etc.). Here are some things to consider when establishing your initial price range:
- Income Stability -Can you afford to make the monthly mortgage payments, no questions asked? Do you have a steady source of income or are you relying on speculative investing like stocks? Job stability is perhaps the most important thing to consider when figuring out how to pay off a new home.
- Mortgage Terms -How much money do you need to borrow? What is the initial down payment? Is it something risky like negative amortization, or an adjustable-rate mortgage (ARM)? The terms of your mortgage (and the interest rates that apply) may impact how you’ll be able to “afford” a home down the line. Consider this carefully.
- Credit Score – You will need a good credit score to qualify for any home loan with favorable interest rates. The median score of U.S. credit reports tends to range from 720-730, so aim to be well above 700. Consumer reporting agencies are required to give you a free copy of your credit score once a year, so take advantage of that before you begin shopping for home loans.
- Additional Costs – This includes closing costs, property taxes, and the costs of moving, remodeling, and furnishing your new home. Spend some time taking into account all foreseeable expenses.
Because finding the right home loan can take time, financing is a step that should be taken while you begin your search for a new home. Here are the basics on financing a home through a traditional mortgage agreement.
Home loans are usually secured by a mortgage that gives the lender a right to repossess your home for failure to repay the loan under specified conditions. Know what these conditions are. There are many different types of mortgages, so it’s important to talk to a professional and get educated before you put your dream home up as collateral.
When choosing a lender, there are a number of ways to compare interest rates online. There are online mortgage centers and comparative review sites like Credit Karma and the Zillow Mortgage Marketplace that can help you connect with other borrowers and gain helpful feedback. When in doubt, contact your local Bay Area real estate broker for advice.
FIND A HOME
Though this seems like the simplest step, it is by far the most important. There is no point spending hundreds of thousands on a house that doesn’t meet all of your criteria. What makes for a “dream home” can vary widely, but here are some general points to consider:
- Home Design – This includes every desired aspect of size, functionality, landscaping and appearance. How many bedrooms and baths does the house have? How big is the backyard? Is it furnished with modern appliances? Is there carpet or tile? Double paned windows? A pool? Consider home maintenance, structural safety, energy costs (watering, heating, air-conditioning) and conformance with relevant zoning codes.
- Local Community – The culture and values of the surrounding community will play a big role in your decision. Thankfully, the San Francisco Bay Area is one of the most diverse regions in the world, and there is a neighborhood that encapsulates every kind of lifestyle. For more information on East Bay Area communities, check out ourCommunity Resources page for neighborhood safety, quality of local schools, police, fire stations, hospitals, and other civil services.
- Property Values – Although most people purchase a house to serve as their primary residence, it is always preferable to purchase a home in areas where property values are rising. Thankfully, Bay Area real estate is becoming ever more valuable, and shows no signs of slowing down.
CLOSE THE SALE
Once you have found your dream house, mapped out payments, and obtained the necessary financing , it will be time to consummate the home sale. This happens during a period called escrow, where an impartial third party (escrow agent) holds the money and the deed in trust until all the paperwork has been put in order.
The house will then be transferred to you while payment is disbursed to the seller. The transaction as between the buyer and the seller will then be complete, but if you borrowed money to meet the purchase price, the lender will retain a mortgage that gives them the right to foreclose on your house if you fail to repay the loan.
Because closing can be a complex process, it’s important to consult frequently with your Bay Area real estate broker to make sure everything is in order. Here are some important things to remember as you go through closing:
- Down Payment – You will have to deliver down payment at closing, along with closing costs. Payment can be made by a cashiers check or a wire transfer (cash not allowed).
- Proof Of Insurance – You will have to bring proof of homeowner’s insurance to closing. This insurance must be in effect on the day you arrive for closing. You should also procure title insurance, which is basically a warranty that the seller has the right to sell the property to you, free from any title defects.
- Photo ID – A current driver’s license or passport to serve as proof of your identity.
- Deed – The document that officially transfers title from the seller to the buyer.
After the deed is transferred and closing is completed, you will be the proud owner of a new home!
If you are interested in buying a home in the East Bay Area, feel free to Contact Us at (888) 315-6320. We will be available to talk strategy and answer any questions that you have.