The simple answer is yes, you should get pre approved before looking at homes as it benefits all parties involved. As a buyer it streamlines your searching process, and allows you to look in the right neighborhoods and price range for your dream home. Secondly, Realtors prefer to work with borrowers that have a pre-approval letter because it gives them the confidence that the deal will get closed, and it also it allows them to use their expertise to find the right home for you. Lastly, it gives you a competitive advantage over other buyers that do not have pre-approval letters, because sellers are more likely to accept an offer from a buyer that has a letter.
The seller is responsible for paying both the buyer and sellers Realtor fees. Realtor fees often range from 2.5% to 3% for each the listing agent and the buyers agent. This totals between 5%-6% in Realtor fees paid by the seller at closing, from their net proceeds of the sale.
There are required monthly/ annual recurring home ownership costs such as:
Property Taxes – cost depends on city/county (ex 1.2% of value)
Homeowners Insurance – varies depending on location and home size (ex: $750/year)
Utilities – Gas/electric, water, sewage, garbage.
There are also costs that could possibly arise, and optional home costs such as:
Maintenance – (Sewer & drain service, electrical repair, plumbing repair, termite/pest prevention, landscaping, hvac maintenance, interior/exterior paint, roof repair, etc.)
Cable/Internet – (Optional)
Earthquake Insurance (California – Optional)
Homeowners Association (Optional – depending on home location)
Home ownership may not be for everyone, but it is important to at least compare renting versus home ownership to understand all of your options. There are many different factors to consider and questions to ask yourself before determining is homeownership:
Our Loan Officers will be able to help you analyze your scenario and help you understand the pros and cons of each option. Below are a couple questions to think about:
- Where do you see yourself living and for how long?
If you only plan on living in a certain location for only a few years then it may be easier or safer financially to rent as you may not benefit from owning a home for that short period of time if you would be selling the property once you moved. A factor to consider is that the the seller pays the Real Estate Agents commissions of often around 5% in California (2.5% buyers agent, 2.5% sellers agent).Your property may not appreciate by the 5% over only a few years in order to cover that cost to sell, making your cost of ownership higher.
- Comfortability with Homeownership costs
The most important thing is to be comfortable with the monthly mortgage payment each month, including property taxes, home ownership and possibly other unforeseen costs associated with homeownership. You want to ensure not to push your limits on your monthly payments, and even if you “qualify” for a certain loan amount, you may want to instead start with what monthly payment you are comfortable with and back into a Purchase Price/ Loan Amount. Unforeseen items come up such as roof repairs, termites, plumbing and electrical, repairs, etc. It is important to have a safety net for these items.
The first step in selling your home is contacting one of our experiences Realtors at Preferred Financial. They will walk you through the process of selling your home and will advise on a targeted listing price. The Agent will then determine what steps are needed in order to ensure your home is in the best condition possible to receive the highest offer price. Your agent will go over all steps needed which may include fixing or updating certain items before listing, staging the home, marketing, and open houses. Contact your Preferred Financial Realtor to get a detailed outline of selling your home.
The first step in buying your home is doing the proper research. You need to find out if you are a good candidate to become a homeowner. You can start by looking at some of the home prices in your area and the estimated housing expenses that come with owning a home (See: What costs are associated with owning a home). Next you should evaluate your credit score, and make sure that it is sufficient. Poor credit history can result in the denial of a loan or a significant hit to your mortgage costs. After, you are done conducting research you should begin to narrow your search to find out what homes fall in your price range. A lot of time can be wasted searching for homes that are unobtainable. Next, you should find a Realtor that fits you, and is knowledgeable of the area. Realtors can assist in the process and further narrow the search for your dream home. After finding the right realtor, you should seek a lender that can provide you with a pre-approval letter. This letter will give you a peace of mind when searching for potential homes in the area, and will give the seller confidence that you will be able to go through with the deal.
After you lay all of the groundwork you can begin to seriously shop for a home.