Buying a home is not as simple as one would think. On TV, house hunters go through the fun process of looking at several different properties. The real estate agent assists the house buyers in imagining what the property could look like with a little renovation and updating. The show ends with the new homeowners gushing about how happy they are to have found a new home.
If only it were that easy. What TV doesn’t show you is the multi-stepped process of buying a house that includes evaluating finances, understanding local real estate trends, getting pre-approved for a loan, and going through the inspection process.
If the TV show showed the real-life process, the ratings would probably plummet. House buying is a lot of work.
Before you drop in at an Open House, it is smart to first do a little bit of research on the process of home ownership. Check out the eight steps to buying a house in New Hampshire.
Evaluate Your Current Financial Situation
Evaluating your finances isn’t fun, at least for most people. There are those exceptional people whose hearts skip a beat when doing taxes, but those people are not to be trusted.
For the rest of us who don’t like dealing with money, how do you know how much of a house you can afford? Most experts would tell you that you should be looking for a home that costs three to five times your yearly income. This number depends on your comfort level and your lifestyle. If you have other debt or a lifestyle that includes frequent trips to the mall, you may want to look for a home on the lower end of your price range.
Before you start the process, it would be wise to look at your credit report and your debt. Mortgage lenders are looking for a credit score of 620 or higher, even though some lenders will go below that amount.
Once you have determined your price range, look at the amount in your savings account. Ideally, you will have at least 20% of the home’s value saved up for the down payment. It’s not a deal breaker if you have less than that amount, but 20% is ideal. There are first-time home buyer mortgages available for people who have not saved up the traditional 20%.
There are other financial considerations when buying a home. You may need to buy a refrigerator and lawn mower immediately. You may need to buy curtains or blinds, and of course, there are the moving expenses as well.
Are you ready to take on the expense of a garbage disposal that suddenly bites the dust?
Are you ready to spend your weekends staining your deck or your fence?
Up to now, you have been calling your landlord when the air conditioner isn’t operating, or a mouse gets in your pantry. Those headaches will be yours after you sign the papers at closing.
It also doesn’t make sense for you to go through the process of buying a home if you aren’t planning on staying in the area for several years. If you’re sure your job will be changing within the year, you might consider waiting to go through the home buying process.
Find a Great New Hampshire Real Estate Agent
If this is your first time buying a house, work with a highly experienced buyer’s agent. At first, it may feel that a buyer’s agent is just a person who unlocks doors for you during your showings, but your relationship with these professionals will become extremely important as you continue in the process.
This person should point out the positive and negative aspects of each property. This is important if you are new to looking at homes. For example, did you think to look at the condition of the neighboring properties? Your buyers agent should remind you to consider the condition of the neighborhood before considering making an offer on a home.
This person should be your negotiator to help you get the best price on the home. This professional should help you through the process, such as helping you find a good home inspector or detailing the costs you will be responsible for during the closing process.
Having a buyer’s agent shouldn’t cost you anything. Most of the time, the owner of the home pays the commission for the buyer’s agent. In fact, if you work with a Clever Partner Agent, you could qualify for a Home Buyers Rebate, which will give you $1,000 to put toward your closing costs.
Read Up on Local Real Estate Market Trends
You know enough about real estate to understand that timing is essential. Is it a buyer’s or seller’s market? When is the best time to buy a house in New Hampshire?
Currently, the median home value in New Hampshire is $248,399. This is more expensive than many states, but the state ranks consistently high in livability studies.
The real estate market in New Hampshire is very hot right now. Home values have gone up in the last year, and they are expected to rise an additional 4% in 2019.
It is challenging to analyze real estate trends for an entire state. Prices and availability tend to fluctuate on a regional level. For example, the difference in the average cost of a home in Salem and a house in Rochester is more than $123,000.
Since there is such a discrepancy of prices from cities to cities and from neighborhoods to neighborhoods, it is extremely essential to work with an experienced, local real estate agent who knows the peculiarities of the local market.
Get Pre-Approved for a Mortgage
The next step in purchasing your home is getting pre-qualified. To pre-qualify for a loan, you talk with a mortgage company or bank about your assets and debts. You self report your income and your current credit score.
The mortgage company professional will look at the information you have given him or her and suggest mortgage products that you may qualify for later in the process. This gives you the ability to shop around for the best rates.
Once you have determined which company you would prefer to work with, you will go through the pre-approval process. There is a difference between the pre-qualification process and the pre-approval process. During this process, all the information that you previously gave the institution will be verified. They will confirm your income and credit score. Pre-approvals take time, so don’t expect that you can start the process one day and have an offer approved on a home the next day.
Buyers want to see a pre-approval letter in your hand before they accept an offer on the house in a competitive market.
Start House Hunting
Finally, the fun part starts. It’s time to look at houses in your price range.
How do you pick a home?
First, determine your priorities. Do you have physical restrictions that would make living in a multi-level home difficult? Do you have to have a garage? Are you looking for a home in a specific school district?
Next, only look at houses in your price range. It does no good to look at homes that you can’t afford right now because then you will be comparing every other home within your price range with the fantastic property that was $100,000 out of your price range. You will enjoy the process much more if you don’t have the image of a beautiful home with hardwood floors in your mind when looking at less expensive homes with less-than-new carpeting.
Finally, remember that your home is an investment. Use online tools and your buyers agent’s recommendation to narrow your search. Look for the least expensive home in safe neighborhoods.
Even if you don’t have kids now, you may have some before you are ready to move. Make sure the local school district has a good reputation. Your future buyers may think this is an important feature, even if it is not a determining factor for you.
Make an Offer
Once you have found THE house, and you are ready to make an offer, work with your buyers agent to draft an offer letter. Your buyers agent has experience in such things and should walk you through the process.
Here’s how it typically works.
First, your buyer’s agent will contact the listing agent to ascertain whether there are any other offers on the table. If there are, you may have to prepare yourself for a bidding war. How much are you willing to pay for the house of your dreams?
Once the amount that you are willing to pay has been determined, you may need to write a check for the earnest money that will show the seller how earnest you are to purchase the home. This amount is usually between 1% and 3% of the purchase price.
The offer letter usually has the terms of the payment, the date which you expect to be able to close on the home, a provision of who will pay for the inspections and title insurance, an arrangement to perform a last-minute review of the property, and a deadline for the offer.
The offer letter, along with a prequalifying letter from your mortgage company and the earnest money will be sent to the home seller. Then you wait to hear back to see if your preliminary offer was accepted or not.
Inspections and Negotiations
You were thankful for your buyers agent when writing the offer for the home, but you will be extremely grateful for your buyers agent during the negotiation stage of home buying.
Let’s assume that the home seller has accepted the offer. You will then hire a professional home inspector to scrutinize the home. Ask to walk through with the home inspector during the process. Chances are, the inspector may find several issues with the house. You can use this knowledge to negotiate the price for the home.
For example, maybe the home inspector found that the garbage disposal doesn’t function or an outlet doesn’t work. You can point this out to the homeowner and ask for him or her to pay more of the closing costs since you will need to pay for the repairs.
Your buyers agent should know enough about the market and seller to determine how much to push back to get the best price. The market may be so competitive that you will not be able to ask for many concessions.
It’s Closing Time!
You are finally ready to close on your house. Your agent should be able to help you determine your financial responsibility during this process.
One cost that varies from state to state is the real estate transfer tax. Unfortunately for you, New Hampshire buyers are required to pay .75% of the price of the house for this tax at closing. You may also be responsible for mortgage fees, escrow funds (for property taxes and home insurance), appraisal fees and inspection fees. It is also essential to know that New Hampshire has some of the highest property taxes in the country.
According to a recent study by Bankrate, the average closing costs for a buyer in the state of New Hampshire is $2,048. Other studies say to plan on spending 3% of the purchase price on closing costs.
Since the price of homes fluctuates so much depending on the New Hampshire city, these costs can vary greatly too.
For example, if you purchase a home in Hudson, 3% of the average home value of $278,400 is $8,352. If you are purchasing a property in Rochester, where the average home value is $196,300, you can plan on spending $5,889 during closing.
Even if you have purchased a home once or twice before, going through the process without a professional buyers agent is a mistake. Find the best agent in your area of New Hampshire by filling out our online form. Believe me, a good buyer’s agent is worth their weight in gold.