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Guide to Buying a Home

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Home buying in itself represents an achievement of a milestone in your life, not to mention the huge expenditure that goes into it. Whether you are a first-time home buyer or a veteran, there are some ground rules to follow. A prior credit approval by a lender is needed before you begin the groundwork on looking for a new home and making an offer on it, so before the process truly gets started you should sit down with your bank and discuss your options. However, once you are pre-approved for a certain price range, then you may begin the process of searching for your next dream home.

Do your homework

If you intend to own your dream home, then the first step is setting up goals to go along with deadlines. First decide what type of property you need - a house, townhouse or an apartment unit and in which location.

Be very specific in your search as home markets depend largely on the type of neighborhood you'll be searching in and the property type. Upon finalizing a property it is better to do a lot of your own background research regarding building issues and other such things. Your bank will also do their own research into the property, as will your real estate agent.

Organizing your finances

After deciding on the type of property and location, you'll next need to work on your budget. Exercising discipline and being realistic about your income and expenditure will help you in getting a clear picture of what you can spend on a home.

Once you arrive at a figure of how much money you have saved and how big of a mortgage you will need to borrow from the lender, then it's time for you to explore the loan market. As a rule of thumb, your mortgage payments should not be greater than 30 percent of your before-tax income. You'll need to do a lot of homework to get the best loan at the right interest rates. Various home loan tools are available on the Internet that can help you in comparing and choosing the best loan that suits your needs and your budget.

Government grants

In addition to loans that the bank will provide you, there are also a number of ways to receive financial assistance from the government on the purchase of your home. Information about various first-time homebuyer grants and federal homeowner grants can be obtained from your local real estate office or from the state government. The federal government also has a number of programs dedicated to facilitating the process for first-time home buyers. You can find out if your income makes you eligible to apply for any of these grants and then fill out an application.

Mode of buying

There are two main modes of buying - private seller and auction. The former type deals directly with a seller, or a real estate agent who represents the seller, while the latter involves bidding for the property that you would like to buy.

There are certain things to watch for before buying a property from a private seller: being aware of the prices of comparable houses in the immediate area that you intend to buy; hiring a buyer's agent can be helpful; and there is a cooling-off period after signing the contract where you can change your mind about buying the property without any legal complications. For auctions you need to set an absolute limit and stick to it, no matter what. Keep a check ready to pay the five to ten percent deposit that you need to pay on the bidding day, if you are successful.

Hire a home inspector

A professional inspector plays a pivotal role in the home-buying process by getting the home inspected prior to your closing and outlining any issues with the home that need to be addressed, either by you after you move in, or by the current homeowners prior to closing.

Before bidding on a property make sure your inspector checks to make sure that the property is compliant with local building laws and codes. It is also good practice to check for inclusions such as stove, light fittings, and blinds that are listed in the contract.

Cooling-off period

A cooling-off period is allocation of two business days for you to change your mind about the property that you have put on offer on without any legal consequences. This period is usually from the date of contract of sale or from the day you received the vendor's statement, whichever happened last. If you decide to retract from the purchase, your holding deposit is not returned but any larger deposits will be returned to you. A cooling-off period is not applicable to properties bought at auction.

Closing

So you've been house hunting for months and you've seen countless houses that are close to perfect, but just don't give you that warm and fuzzy feeling when you walk through the door. And then, finally, you find the one that you can picture yourself living in. You love everything about it, the kitchen, the bedroom, the backyard. Well, where do you go from here?

The first thing you're going to need to do is tell your real estate agent that you've found your house and sit down with them to discuss the next steps. Typically, your agent will prepare you for making an offer on it by researching some comparable homes in the area that have recently been sold in the last six months. By researching this information, the agent can give you a better idea of what kind of offer to make on the house that will be acceptable. You don't want to make an offer that's too low, and you also don't want to offer too much, so it's important to find that middle ground.

Once you've come up with a figure that's comfortable for you, your real estate agent will present the offer to the broker selling the property for the owners. The owners will then respond in one of two ways. If they like your offer and agree that it's reasonable, they will accept it and you can move on to the next step of the process. However, if they feel that you are coming in a little too low for their liking, they will often make a counter-offer. In that case you can either accept their counter-offer, or agree to meet somewhere in the middle if their counter is too high for you.

Once you agree on a figure, the next step will be to have an inspector come to the house and inspect the property to make sure that everything checks out and that there are no problems with the foundation, roof, windows, heating, plumbing, etc. The bank that you are borrowing from will also send someone to appraise the house and give their assessment on the true value of the home.

When all of this is finished, the last thing to do before officially closing on the home will be to take care of all closing costs, which will go to a few different places, including paying the real estate lawyer that you hire to handle the contract and the closing.

Photo by: Artur 84 (Freedigitalphotos.net)

Robert Moreschi  Posted by Robert Moreschi on February 26, 2013

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