When buying a home, a critical step in the process is to get a mortgage pre-approval. The lender can then approve the amount that you can spend. You will need to know how much your income will be and the amount of down payment you can make. You don’t want to walk away from the deal because you can’t afford the other fees.
When buying a home, many costs will be due at the settlement or closing. Typically, these total between 3% and 7% of the home’s purchase price. Here is some important information you will need to know.
The Closing Date
The date when the sellers give you the keys to the property is called the closing date. This date is important because once the deed is transferred, the seller is no longer involved in the transaction. It would be best if you had full disclosure of all costs and fees that you and the sellers will incur, so you will know the date that you will have a clean slate.
The Settlement Period
The settlement period is the time set aside before the closing for you to examine the property and to get an estimate of your closing costs. It would be best to prepare all possible buyers or escrows during this period and have a pre-closing budget. Don’t close on the day the inspection comes in. You need time to set the money aside, keep in touch with the seller, and ensure that you have the correct funds in the escrow account to pay for all costs and fees or pre-closing statements.
The Pre-closing Statement
You should have a pre-closing statement delivered to you at least two days before the date of closing. The report is an estimate of all the money you will need to pre-close the loan. You should have a copy of the pre-closing statement for any buyer you have negotiated a contract with. You should have a copy for any seller that is closing on your property.
The Deposit
The deposit is the amount of money needed in the account at the time of closing. The amount should be sufficient to pay for all costs and fees plus a possible 7% processing fee if the funds transfer to a new bank. Suppose you need to exchange funds with the seller, and the seller wants their money deposited into another account. In that case, the amount should be sufficient to pay the processing fee plus up to 1% of the funds received if the funds are deposited to a new bank. If the seller has a good working relationship with their banker, they may ask for their money at closing. It is better to have enough money in the escrow account to pay for the costs and fees plus the processing fee.
Purchasing a home can be exciting and yet, at the same time, a somewhat intimidating experience in life. It is, of course, a huge responsibility. Many people find it more rewarding to be a homeowner than a tenant owner.
If you are looking to purchase your first house, have courage, and follow your heart. Find a great realtor and don’t get tied down by other peoples’ financial plans. Research and know what you want and can afford. You will then be prepared for home hunting, negotiating, and purchasing the home you desire.
For more information on buying a home or the steps involved, click here.