- Lainie Eilenberger
In today’s blog I will teach you how to buy a house in West Texas step-by-step. It seems like everyone is in the market for a house these days, especially in West Texas. Buying a home is a huge commitment and a potentially long-term commitment at that, so that’s why I’m going to walk you through the home buying process step-by-step in 11 easy steps.
#1. Are you ready to own a home? You have to look yourself in the mirror and ask yourself, am I in a position that I’m ready and responsible enough to own a home. I recommend having steady income and employment if you are. If you have a regular paycheck coming in, and you’re able to budget and understand what your money situation is, this is a good thing. If you’re in sales or if you have an unreliable source of income, because your income is primarily commission based, or because you’re a business owner and you don’t know how much money you’re going to make each month, then recommend having at least 6 to 12 months of cash reserves to compensate for it. You’re going to need to know what your debt-to-income ratio is. The banks are going to base this on your gross monthly debt obligations divided by your gross income. I actually like to look at this on net income, but just for the gross income basis this should at least be under 36%. In my opinion, if you’re above 36% of your monthly debt divided by your gross income, that’s too high and it could cause some problems in underwriting when getting a mortgage. You also need to know how good your credit is. Have you looked at it lately, if not you need to do so? A good credit score equals a better mortgage rate, which means more money in your pocket each month.
#2. Knowing how much house you can afford. This is probably the most important aspect of home ownership, because this will either determine if you’re living comfortably or if you’re going to be house poor. So, 1st and foremost I highly recommend that you use a mortgage affordability calculator, which can prevent you from making a huge financial mistake by buying too much house (I have provided a link to a mortgage affordability calculator at the bottom of this blog). What this calculator does is, it takes you and your partner’s income, and it determines what your monthly net income is minus all of your expenses. I’d recommend not spending any more than 30% of your net income on all housing cost, which includes the principal, interest, taxes, insurance, HOA fees, and utilities. I’m talking all in your housing cost should not be any more than 30% of your net income. With that being said, check out the affordability calculator with the link provided below this blog, that way you know exactly how much house you can afford.
3#. Down-payment and closing cost. If you don’t know what a down-payment is, it’s simply a % of the home that you’re paying for with cash, then you’re taking out a mortgage for the rest of the amount. You can put anywhere from 0% to 100% down. 100% is paying cash and 0% is using something like a VA loan or a USD loan, which doesn’t apply to most people. On a conventional mortgage you can typically put anywhere from 3% to 99% down; however, most people put anywhere from 3% to 20% down. For most banks, if you put less than 20% down, then you’re going to get PMI, which stands for private mortgage insurance. You want to avoid PMI, because this doesn’t go toward principle or interest, it’s literally just a monthly fee which provides insurance to bank or the lender giving you that mortgage. If you want to use 20% down as an example, then on a 100,000-dollar home you’re looking at a 20,000 dollar down payment. When you’re going into a home purchase, you’re going to have to have a down payment of some sort, and you’re also going to have closing costs. If you do opt to get a mortgage you’re going to have to get involved with a bank and their going to require things like an appraisal, title, closing fees & bank fees. These typically range anywhere from 1% to 6% of the value of the home. If you’re smart, you’ll put away about 3% for closing cost, just to make sure you have that money ready and available.
#4. Getting your mortgage pre-approval. This is simply going to the bank or credit union and telling them you like to purchase a home and would like to know how much money you would be approved for on a home loan. They’ll take your information and look at your income, your debt-to-income ratio, your credit score, your other obligations and so on and so forth. They’ll come back to you with a dollar amount that your essentially pre-approved for a mortgage. This will help you to budget better and you will know this is the amount of money we can borrow, which is how much house you can afford. This helps get you under contract fast when you find a home you like. So, instead of trying to talk the seller and have your real estate agent writing offer letters, which I’ll talk about later in this blog, you can actually show the seller that you’re interested in their home by showing them your pre-approval letter. The pre-approval gives the home seller confidence that you have the needed funds to buy the home and that the close of the home will happen quickly.
#5. Finding a Real Estate Agent. Real estate agents are kind of like a lawyer representing you for a legal matter or a medical professional giving you advice for a medical matter, or your financial advisor giving your advising you on an investment. Their specialty is all things real estate and they write real estate offers, the negotiate the deal and they are your guide through the entire home buying and home selling process. They are your trusted advisor when looking for homes or when dealing with people wanting to buy your home. I recommend you work with a real estate agent they walk you safely through the home buying and selling process, and without one you risk making a big financial or legal mistake that will haunt you for a long time. When looking for a real estate agent, I advise you to interview at least 3 agents before you make a decision. Each agent is different and like in all things, some agents are good and others are bad. During your meeting with these agents you’ll be able to get a feel for how well you personally like real estate agent and you’ll learn what services they will provide you.
#6. Starting the house hunt. The most important thing when starting the house search is establishing your criteria. At this point you’ve established your price, square footage that you need, the number of bedrooms & bathrooms needed for your family and also most importantly your wants and your needs. If you’re doing this with a spouse or a significant other, figure out what things you align with on your wants and needs. Think about things like: do you want a swimming pool, gazebo, or a 4-car garage, whatever. Make sure that you’re both on the same page, because you will see once you start to see more and more homes that not being on the same page is going to be a an area for contention and arguments, so make sure you outline what you want in the beginning. You also need to rank your priorities. So, if you have a list of wants and needs, make sure that you give it to your real estate agent who’s going to be looking through the MLS for the houses for your spouse o partner. Make sure your ranking these priorities highest to lowest. You need to determine what can you live with and what you can you live without. Then, you need to start looking at everything from a dollar for square foot perspective (Price per square-foot). You may have 2 different houses that you like and their amenities are similar, but they’ll have much different dollar per square foot prices. If one coming in at 150-dollars a square foot and the other coming in at 185, then what’s the 35 dollar per square foot difference. Different neighborhoods will typically have different dollar per square foot prices. So, I look at everything on a price per square foot basis, because it will help you determine what areas you’ll be able to get the most house and if you’re getting ripped off or not.
#7. Making the offer and negotiating. You want to get everything in writing, and remember everything is negotiable. If you like a certain statue or piece of art, or even a piece of gym equipment you can negotiate all of that in writing of the contract. Most likely, they’ll actually let you do this after the contract is signed, however it helps to get everything in writing, first and foremost. Basically, the offer is what you’re willing to pay for the property, any contingencies on financing and inspection, etc. Once all of those things are checked off, you can then move on to finally completing the offer. People love stories, so when you’re making your offer if you’re newlyweds and you have a baby on the way then provide a written letter with your offer. People love stories and they may be more inclined to sale you their house, even if it’s not the best one on the table. You’ll also need to put down earnest money. Earnest money is a good faith deposit that goes towards the down payment or the closing cost of the home sale; however, if you walk away from the deal, you will lose that earnest money if it’s your fault for the deal not going through. This is typically a couple thousand dollars, but could be less or more depending on the price of the house. It’s basically you putting a good foot forward with the seller by saying that you’re serious about this offer to buy the home. At this point 3 things can happen. The seller can accept your offer, decline your offer or they can come back with a counter offer. Your real estate agent is an expert at making offers and negotiating, so if you question your ability to do this, I highly recommend finding an agent to represent you.
#8. Inspection & Appraisal. Once you get the contract accepted or under contract, you’ll have time to get the inspection and appraisal. These are 2 different things, so don’t get them confused. Once the property is under contract, I recommend getting a home inspection. During a house inspection the inspector comes out and inspects the roof, the inside of the house, the plumbing, checks radon, gas, mold and things like that. They will identify anything that is wrong, or could be a foreseeable issue with the property. The appraisal is a completely different. This is a certified professional that tells you the value of the home depending on comparable properties, the build quality, the neighborhood, things like that. So, if the inspection comes back and find that the roof is shot and there’s mold in the home, and the appraisal comes back finding that the home isn’t as valuable as it was listed, then you can use this as bargaining in the negotiating of the deal. You can actually get a credit or some money off of the house depending on the amount of money it cost to remediate the issues. So, with that being said the inspection and appraisal are extremely important.
#9. Repairs & Credits. When the inspector finds issues with the home you can ask for a discount off of the purchase price of the home. You can ask for a credit at closing for example, or you can have the seller fix it, or remediate it, so that by the time you do your final walk-through you can see all the issues have been fixed that were brought up in the contract. Very simply just want to recap, this is where you can save a lot of money.
#10. Completing your final walk-through. The final walk-through is where you go through the house after the seller has taken everything out of it. They are responsible for taking all of their possessions that you didn’t negotiate in the deal. Basically, you want to see if everything is where they left it. You don’t want any of the beautiful fixtures taken off the walls and you don’t want any damage happening after during or after the move out. It’s wise to take before and after pictures, that way when you go through the final walk-through, you have verification if something was damaged or taken that shouldn’t have been. Your final walk-through is a time to make sure everything is in order. You will also need to have the seller show you around and show you everything and how it works. If there’s a nice speaker system, or an alarm system or automatic lighting you will want the seller to explain it to you. You want to make sure that they show you everything, so afterwards don’t have to get a specialist to come help you with it.
#11. To close. Congratulations, you’re almost a home owner. At this point you’re lending institutions is going to send you a closing disclosure. This is basically an outline of all the things that you need to bring to the closing table. This will happen roughly 2-4 days before the actual closing date. During this time you will be reviewing your number, so make sure the numbers your lender gave you during your pre-approval and in all of the mortgage disclosure documents are right. You will want to review the principal, interest, and amortization schedule to make sure it adds up and you are indeed getting the mortgage that you were promised by your lender. This is your settlement statement and is very important, because it’s showing you all of the closing cost, the purchase price of the home, the down payment amount, etc. Make sure everything balances out to 0 and that you’re not paying more than you should be.
The one thing that I want you take away from this blog is a house is a big responsibility and a major investment. You need to be thoroughly prepared and ready for everything that you’re going to need to do in order to buy a home. You need to watch your budget and be responsible with your spending prior to buying a home, because having too much debt or bad credit will impact how much home you can buy, and even hinder your ability to buy a home. If your considering buying a home, I would highly recommend you give me a call, so that I can answer all of your real estate questions and help you on your journey to home ownership. If you’re interested in buying a home in Lubbock, or the surrounding areas click on Look for homes at the bottom or top of this page. There you will be able to view all homes for sale in Lubbock or the surrounding areas and my site is updated with new homes for sale 24/7.
Home Affordability Calculator - Home Affordability Calculator - How Much House Can I Afford - realtor.com®
NOTE - If you’re planning on selling and are in the market for a top agent to make it happen, I would love to help!
We provide real estate services to these West Texas cities - Abernathy, Brownfield, Buffalo Springs, Crosbyton, Denver City, Farwell, Floydada, Idalou, Hale Center, Lamesa, Levelland, Littlefield, Lubbock, Muleshoe, New Deal, New Home, Olton, Plains, Plainview, Post, Ralls, Ransom Canyon, Seagraves, Seminole, Shallowater, Spur, Sudan, Sundown, Tahoka, Tulia and Wolfforth.
We provide real estate services to these counties - Bailey County, Briscoe County, Castro County, Crosby County, Dawson County, Dickens County, Floyd County, Gaines County, Garza County, Hale County, Hockley County, Kent County, Lamb County, Lubbock County, Lynn County, Parmer County, Scurry County, Swisher County, Terry County and Yoakum County.
-Turn the Key to your clean Slate-
Lainie Eilenberger, REALTOR
Key and Slate Real Estate Group
Keller Williams Realty
806-928-4453
Licensed Realtor in Texas
I look forward to meeting you,
Lainie Eilenberger
Key & Slate Real Estate Group
10210 Quaker Ave.
Lubbock, Texas 79424
leilenberger@kw.com
806-928-4453
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