If you’ve heard that the home buying process is difficult, you heard right. But that doesn’t make it impossible. It doesn’t even mean it has to be hard for you. All it takes is a lot of research and arming yourself with important information to help you make the most of your process.
Use the following tips to help make the process easier for you.
Get a Pre-Approval
There’s nothing worse than bidding on a home only to find out you can’t get the financing. If you don’t have a financing contingency in your contract, you could be left without earnest money and a home. Don’t let that happen to you. Instead, get that pre-approval.
We recommend that obtaining the pre-approval be your first step in the home buying process. Before you even look at the listings online or contact a real estate agent, contact a few banks first. How do you know what you can afford before you talk to a bank? We recommend talking with at least 3 banks to get a feel for what a loan will cost you and how much the average lender will give you.
With your pre-approval letter in hand, you can sidestep the lack of financing obstacle when buying a home.
Pay for an Inspection
While the last thing you probably want to do is fork out more money than is required, an inspection is highly recommended. Don’t make the mistake of relying on the appraiser to figure out if the home is in good condition. The appraiser’s job is to determine a fair market value for the home. While he does look at the basic operation of the home, he doesn’t dig as deep as an inspector.
The inspector can let you know if anything major is wrong with the home. Cracks in the foundation, a roof that needs replacing, or failing utilities are a few of the areas inspectors can point out to you. If there are issues that are bad enough to make you want to back out of the purchase, you can do so during the inspection contingency period. If you get past that point, you have to buy the home or you risk voiding a legal contract. You could end up losing your earnest money or even finding yourself in court with a legal battle on your hands if that happens.
Know How to Handle a Low Appraisal
The financing of your loan depends on the appraised value. If the appraiser doesn’t feel that the home is worth the purchase price, you need a Plan B. Following are some of the most common remedies:
- Negotiate a lower purchase price with the seller – If the value comes in much lower than the agreed upon purchase price, you can try negotiating with the seller. Let him see a copy of the appraisal so he realizes that he won’t get the asking price for the home unless he finds a cash buyer. Not all sellers are willing to negotiate, though, so prepare yourself for the worst-case scenario.
- Make up the difference in cash – If you have the difference between the appraised value and purchase price available in cash, you may be able to make up the difference. This way the lender doesn’t give you a loan that is worth more than the home’s value. You may salvage your loan while still getting the home. You may want to think hard about this option, though, as you enter homeownership upside down (paying more than the home is worth).
- Walk away from the purchase – No one wants to think about walking away from their home purchase, but if it doesn’t make financial sense, it’s a good idea to find a home that is worth at least the amount you agree to pay for it.
Have a Real Estate Attorney
Even if you think you know enough about the home buying process, you need professional representation. It’s easy for buyers and sellers to get emotionally involved in the process, causing them to make rash decisions.
Let an attorney that is not tied to the seller at all, represent you. This neutral third party can help you clearly see the conditions of the home purchase and the implications they will have on your future. Real estate attorneys have your best interests at heart. They will point out any red flags that they see that you may want to consider.
At the very least, the attorney can make sure that the purchase contract is acceptable before you sign it. Once you sign that contract, you are legally bound to the purchase, so you want to make sure all aspects of your financial well-being are protected.
Overcoming obstacles during the home buying process isn’t impossible, but it does require a little work on your part. Make sure you have the necessary representation and that you fully understand every step you take during the process to ensure that you have your own interests protected.