Woo hoo! You’re finally ready to look for that “starter” cottage or maybe there’s a condo that’s caught your eye. Buying your first home is exciting, but it can also be confusing and stressful. Homie de-mystifies the home-buying process, automates many of the steps, and makes buying a home without a real estate agent a reality. Here’s how it works.
How much can you afford?
How do you calculate how much you can afford to spend on your home? A good rule of thumb is to spend no more than 28 percent of your monthly gross income on your mortgage (the bank won’t let you go much higher than that anyway).
What does that mean? Let’s say you make $55,000 a year, that’s $4,583 gross monthly and puts your 28-percent mortgage at $1,283. Depending on your interest rate, your terms, and how much you put down, you could buy a house or condo between $250,000–$300,000. Keep in mind that your mortgage payment will just part of the overall monthly cost of a home; you’ll also need to cover taxes and insurance.
Now, how does that compare to renting. Average rent costs in Salt Lake City are expected to hit $1,520 per month this summer–$237 more than your hypothetical mortgage payment. Additionally, the 2016 Home Price Expectations Survey predicts Utah home prices will increase in value 10–30 percent in the next five years. Buying now could earn you some sweet equity in just a few short years.
You can get pre-qualified in just a few minutes–without having to put your hands on a single pay stub. Once you’re pre-qualified, our online, step-by-step platform will walk you through gathering the information needed to go from pre-qualified to pre-approved, and then through underwriting. Here’s a look at what you’ll need:
- Pay stubs
- Bank account statements
- Tax returns for the past two years
- Statements from current loans and credit lines
- Names and addresses of your landlords for the past two years.
Remember your credit score will affect your borrowing power and influence the interest rate on your home loan. For ways to give your credit score a hefty boost, read this blog post.
If you’re still saving up for a 20% down payment, stop. Dozens of loan options exist for 0–5% down and you’d be wise to buy sooner rather than later, even if it means paying extra in mortgage insurance for the first few years.
Let the hunt begin
Now that you know what you can afford, you’ve got to find it. Luckily, you only need to look in two places:
- www.homie.com (listings without agents on Homie and on KSL)
- www.utahrealestate.com (listings with agents on the MLS)
Create your list of must-haves
Aside from price, everyone has a mental list of what they’d like to have in a home. Use this checklist to help you clarify what you want:
- # of bedrooms
- # of bathrooms
- Square footage
- Garage, carport
- Walkable area
- Restaurants, shopping, parks
- Lawn size, sprinkler system
Remember, you may need to compromise on some of these things in order to find the right first home.
Use Homie to search and tour
Homie is easy to use. Search by city, zip code, or use the map function to explore new areas. Easily cross-reference favorite homes by price, availability, square feet, and number of bed/baths. Once you find a home you’re interested in, Homie’s Tour software lets you set up a tour with any Homie seller online. You can also look at non-Homie houses. Just call the selling agent to view the home, so you know if you’re interested.
Consider a slightly longer drive for more house
Can’t find what you want in downtown Salt Lake or Sandy? You don’t have to go all the way north to Ogden or South to Provo, but it might be worth expanding your search map to find the features you need in a price range you can afford. An extra five-minute drive can really open up your options.
Make an offer
Yay! You’ve found a home that’s within your price range, has the amenities you want, and is in an ideal location, the next step is to place an offer. At Homie, we make it incredibly easy. Our team of legal experts assist with your paperwork to ensure you place a competitive offer. We also offer free home value reports to show you what comparable homes are selling for in the area. Pretty cool, right?
If the offer is accepted, you’ll move to the due diligence stage. If the seller offers a counter offer, Homie will guide you through the best way to proceed.
Get your loan through underwriting
Once you have a signed contract, get that to your mortgage broker ASAP. It usually takes a couple of times through underwriting before you’ve resolved any potential concerns, so leave yourself at least two weeks to accomplish this step prior to your financing deadline.
Manage inspections and appraisal
Home inspections and the bank appraisal protect you the buyer. The inspections give you a few hours alone in the house with a qualified professional who can help you determine whether there’s any hidden problems that might cause concern. You’ll get to take a close look at that paint job, window casings, and appliances. Your inspector will deliver a written report that highlights major and minor concerns. Discuss this report with your Homie attorney if you need to negotiate repairs or changes to your contract.
If the appraisal comes in at or above the sales price in the contract, you’re golden. Sometimes in a hot market, a buyer can make an offer that is actually higher than the appraised value of the house. When this happens, you have multiple options, including re-negotiating the sales price and even walking away from the deal. Discuss your options with your Homie attorney.
Sign your closing docs
When you’re ready to start closing procedures, the closing paperwork will be prepared by your lender and the title company. You and the seller just sign on the dotted line. Easy!
And once you’ve signed the paperwork, and have been handed the keys to your first home, it’s time to bust out your happy dance because you’ll officially be a HOMEOWNER!