Homebuying Process

You've made the decision to buy a new house. There are many important decisions to make—choosing a mortgage lender, sifting through different loan options, and even finding real estate agents. At first, the process of purchasing a home may seem overwhelming, but the choices you face don't have to be difficult.

 

How much can I afford to pay for my new home?

Now that you've decided to buy a home, the next step is to determine where you'd like to live and how much you are comfortable paying. Generally, a figure between two and three times your annual income is a good guideline in determining how much to pay. However, you also need to consider how much you earn, how much you owe, and how much you have saved.

 

The rule of thumb is that your mortgage payment should be no more than approximately 30 percent (or less) of your income. Your total monthly payments (including mortgage payment) should be no more than 40-45 percent of your income. Although these percentages will vary depending on the type of mortgage you are applying for, they are a good starting point for determining guidelines for how much you can afford.

 

How do I get prequalified?

To obtain your mortgage prequalification, you will need to select a mortgage lender. The lender will walk you through the home purchase process, as well as answer any questions you have about your mortgage loan and borrowing options. They should be able to tell you about fixed- and adjustable-mortgage rates, and explain the process from mortgage application to closing.

 

The next step in the mortgage loan process is to make a list and define exactly what features your new home must have. Your list should describe physical requirements, such as the number of bedrooms, as well as what you expect from the neighborhood and surrounding community. In addition, you should consider factors such as the quality of schools and access to shopping and recreation. While a wish list helps you define what you want in a home, a mortgage prequalification will tell you what you should be able to afford based on the information you provide. Once you find a home you like, the prequalification will immediately demonstrate to the seller that you're a qualified buyer. This can save you time and money, especially when you're competing with other potential buyers.

 

You can obtain a prequalification from First Commercial Bank by completing our online application.

 

How do I make a final offer?

After you've decided on the home you want to buy, the next step to make an offer. It's essential that your offer states your intentions clearly and precisely.

 

YOUR OFFER SHOULD INCLUDE:

• Your proposed price
• Any concessions you want the seller to make
• Any financial contingencies, such as making your offer dependent on your ability to obtain a mortgage
• A specific inventory of what you want included in the sale (don't overlook appliances, window dressings, and other items that you want the seller to leave behind)
• Any home inspections contingencies
• The amount of earnest money being tendered with the offer

 

What is the negotiation process?
When you make an offer, be prepared to negotiate with the seller to arrive at what you both believe to be a fair value for the home. Although this can be an involved process, it has the potential to save you thousands of dollars on the price you ultimately pay.

 

To prepare, gather as much information as you can about comparable homes in the immediate neighborhood that have recently been sold. Look at houses with square footage, number of bedrooms and bathrooms, and other characteristics similar to the home you're considering. A drive-by to compare the general condition of these homes can also be valuable.

 

If you are working with a buyer's agent, he or she can provide you with a comparable market analysis that can be very useful in your negotiations. Also, if you can learn the owner's reason for selling the home, you may have a better idea of how much flexibility there is in the asking price.

 

How do I secure a mortgage?

Once your offer is accepted, it's time to get your mortgage loan. Hopefully you already had your questions about fixed- and adjustable-interest rates answered. When it comes to the mortgage loan process, the more information you have, the better choices you'll be able to make.

 

As an informed homebuyer, you can negotiate with confidence—and remember, the seller will be more likely to respect your offer knowing that your mortgage loan is prequalified. Begin the home purchase process now and apply online for a home loan.