Purchasing a Home

Purchasing a home can be a very exciting and stressful time in your life. Relying on the biblical principles you've learned thus far can certainly help make the process less painful, and even fun. Most people who purchase a home use a mortgage to do so. A mortgage is a loan from a financial institution to purchase your home. Take a look at the video below. Ron Blue explains the best type of mortgage to have when buying your home.

Mr. Blue explains that the best mortgage to choose is the shortest one with the lowest interest rate. Being choosy about your mortgage shows excellent stewardship of your money. A mortgage is a long-term commitment, so you want to be sure to make the right choice.

So, what should you consider when buying a home? A home can be anything from a houseboat to a castle in the mountains of Bavaria. What is the process for purchasing a home? Let's investigate all the details involved.

"As for me and my house, we will serve the Lord." (Joshua 24:15)

Regardless of the type of house you choose, where it is located, or how much you pay for it, remember to keep God at the center of your home always.

Buying a Home

Buying a home can be exciting and lead to many years of enjoyment for you and your family. It can also be very frustrating because the process can be long and disappointing. Using good consumer credit skills and having a competent realtor and lending institution can make buying a house much more pleasant. Let’s get started!

One of the first steps in buying a home is to take a good look at your financial health. This includes knowing important information and doing your homework. Take a look at the items below for more details.

Check your credit rating and FICO score. Look for any ways you can improve this by paying off credit card debt, resolving any disputes or discrepancies that may show up on your report, and possibly speaking with a financial advisor or someone you trust at the financial institution that handles your checking and other accounts.
Go through the process of pre-approval with one or more lending institutions. Lenders will take your provided information about your income, past income tax returns, debt-to-income ratio, and other financial indicators to determine how much you may be able to borrow for the purchase of a house. Realtors and sellers like to deal with those who have been pre-approved by a lender.
Shop for the best interest rates being offered by lenders. Determine the amount of a down payment you can afford and use an amortization schedule to see if you could afford a 15-year mortgage as opposed to a 30-year mortgage. Look at all options from ARM’s (Adjustable Rate Mortgage) to fixed-rate loans to government-subsidized loans. Also, don’t forget to check on things like points (upfront fees that can reduce interest rates) and discounts for auto-draft payments.
If this is your first home, check for special financing for first-time buyers. Some lenders have special financing that can defer payments towards principle for 1 to 5 years to keep payments lower. Also, veterans and others can qualify for special loans from the government. You also may be able to borrow from an investment account such as a 401(k) or IRA without penalty.

Shopping for a Home

Find a good real estate agentto represent you in the search and negotiation process. The real estate agent should be amiable, open, interested, relaxed, confident, and qualified. Learn the agent's rates, methods, experience, and training. Look for a realtor who lives local, works full-time, closes at least several properties per year, and has a reputation for being busy.
Realtors generally work for sellers. A realtor's job is to connect people who want to buy and sell a particular home. For this reason, a realtor has an interest in selling homes. A very good realtor will use his/her experience to sell the right home to the right buyer.
When you do find your realtor, go into exhaustive detail when describing what you want in a home. Be specific about the number of bathrooms and bedrooms, whether or not you prefer an attached garage, the amount of land you desire, and anything else that may be important.
Begin by looking for houses in your price range. Know what's within your budget and what's not. The general rule of thumb here is that you can afford a house that's 2.5 times your yearly household salary. For example, if your annual combined salary is $85,000, you should be able to afford at least a $210,000 mortgage and very possibly more.
Make use of online mortgage calculators. Start crunching numbers, and remember the mortgage shopping you did earlier on. Keep these numbers in mind as you prepare to find your new dream home.
Start to think about what you're really looking for in a home. There are a couple of things in particular that you and your family should give good thought to including:
- What will you and your family need in several years? Will you need more room for children or others?
- What concessions are you willing to make? What are your priorities? Do you care more about a safe neighborhood and good schools over a big backyard? Do you need a big, workable kitchen more than a big luxurious bedroom?
- Do you expect your income to increase over the next couple of years? If your income has increased by 3% for several years in a row and you hold a secure job in a safe industry, you can probably rest assured that buying an expensive but still reasonable mortgage is possible.
Decide on the areas you'd like to live in. Look at prices, home design, proximity to shopping, schools, and other amenities. Read the town paper, if there is one, and chat with the locals. Look beyond the home to the neighborhood and the condition of nearby homes.
The area in which your home is locatedis sometimes a bigger consideration than the home itself since it has a major impact on your home's resale value. Buying a fixer-upper in the right neighborhood can be a great investment, and being able to identify up-and-coming communities — where more people want to live — can lead you to a bargain property that will only appreciate in value.
Visit a few open houses to gauge what's on the market and see firsthand what you want. Pay attention to the overall layout, number of bedrooms and bathrooms, kitchen amenities, and storage. Visit properties you're seriously interested in at various times of the day to check traffic and congestion, available parking, noise levels, and general activities.
Look at comparable houses in the neighborhood. When appraising a home, appraisers will look for comparable homes in the area which have similar features, size, etc. Never buy the most expensive house in the neighborhood. Your bank may balk at financing the home, and you probably won't see your home appreciate in value very much. If you can, buy the least expensive home in a neighborhood — as homes around you sell for more money than you paid, your home's value increases.

Making an Offer to Buy a House

Here are some things to keep in mind as you think about your offer:

What is the seller's financial situation? Is he/she financially comfortable or in need of trimming present expenses?
How long has the home been on the market? Homes that have been on the market for longer periods of time can usually be bid down.
Have they already bought another house? If the sellers aren't currently living in the house they're trying to sell, it may be easier to bid less than you otherwise might.
Look at comparable homes when you make your bid. What did other homes in the neighborhood start off as ("asking price"), and what did they sell at? If homes in the area routinely sold for 5% below asking price, think about making an offer that's anywhere from 8% to 10% lower than the asking price.
Calculate your expected housing expenses. Estimate the annual real estate taxes and insurance costs in your area and add that to the average price of the home you're trying to buy. Also, add how much you can expect to pay in closing costs. Put the total into a mortgage calculator and then evaluate the results.
Determine whether you need to sell your current home in order to afford a new one. If so, any offer to buy that you make will be contingent on that sale. Contingent offers are riskier and less desirable for the seller since the sale can't be completed until the buyer's house is sold. You may want to put your current house on the market first.
Talk to your realtor when you're ready to formally present your offer. Although the guidelines for submitting offers may differ from state to state, this is usually how it goes: You submit your offer to your realtor, who then forwards it to the seller's representative. The seller then decides to accept, reject, or make a counter-offer.
Include earnest money with your offer. Once you sign an offer, you are officially in escrow, which means you are committed to buy the house or lose your deposit, unless you do not get final mortgage approval. During escrow (typically 30 to 90 days), your lender arranges for purchase financing and finalizes your mortgage.

Completing the Sale

The following items are important to consider when completing the purchase of a home. It may be best to rely upon experts to finalize parts of the sale process, but remember, as a buyer, you should be familiar with all aspects happening in the transaction.

Down Payment

Determine how much of a down payment you'll need to offer upfront. A down payment establishes equity, or ownership, in a home. That's also money that you don't have to pay interest on. The more of a down payment you're able to make on your home, the less money you'll ultimately pay on your home.
You will be expected to put down 10-20% of the appraised value of a home.

Home Inspection

Make sure final acceptance is predicated on a suitable home inspection. Request the following surveys and reports: inspection, pests, dry rot, radon, hazardous materials, landslides, flood plains, earthquake faults and crime statistics.
A home inspection costs between $150 and $500, depending on the area, but it can prevent a $100,000 mistake.
If you use the inspection results to negotiate down the price of your purchase, do not refer to the inspection or bids for work in your contract.
Have a home energy audit completed on the house and ensure that the contract is contingent on the outcome. Getting a home energy audit is an essential part of the home buying experience.

Closing

Close escrow. This is usually conducted in an escrow office and involves signing documents related to the property and your mortgage arrangements. The packet of papers includes the deed, proving you now own the house, and the title, which shows that no one else has any claim to it or lien against it.
Consider using your real-estate lawyer to review closing documents and represent you at closing. Again, realtors are unable to give you legal advice. Lawyers may charge $200-$400 for the few minutes they're actually there, but they're paid to look out for you.

Buying a house and making it your home is a big financial step. It is a commitment that will probably last longer than any other financial decision you will ever make.