If you're about to start the process of buying a house in Rhode Island, this is likely to be the biggest investment you'll ever make. The buying process is not only long, but complicated too.
You need to make a significant number of considerations regarding financing, market conditions, negotiations, appraisals, closing costs, and more.
In order to help you along the way, we've listed eight crucial steps to consider when buying a house in Rhode Island.
Step 1: Evaluate Your Current Financial Situation
Before you begin the house hunting process, you first need to assess your current financial situation. This evaluation should go far and beyond just your specific budget.
For example, you also need to think about your eligibility to obtain financing. If you are a low-income or first-time buyer, you’ll be pleased to know that a range of buyer programs are now in existence.
Such programs are available at both a state and federal level.
Learn More: First-Time Home Buyer Programs
As most lenders will look at your credit history, make sure that you take some time to assess your current score.
You should also assess how much money you are likely to have saved before the purchase. This is because you will likely need to cover a down payment, as well as other costs linked to closing the deal.
Finally, you need to evaluate how the property purchase is likely to affect your current financial commitments. If the monthly mortgage payments are higher than you currently pay in rent, you might need to see where you can cut back in other areas of your life.
Step 2: Find a Great Rhode Island Real Estate Agent
The benefits of using a reputable real estate agent based in Rhode Island should not be understated. Not only will they be able to guide you through the entire buying process, but they’ll be able to utilize their extensive knowledge of the local housing market. This includes assistance with timing the market, negotiations, and guidance on suitable buyer programs.
By allowing Clever to connect you with a top-notch agent with expertise of the Rhode Island real estate market, you could also be eligible to receive a home buyer’s rebate. In most cases, you will be able to receive a $1,000 rebate if the property purchase amounts to $150,000 or more.
Learn More: How to Get a Home Buyer’s Rebate
A Clever Partner Agent will also be able to arrange on-demand showings in your preferred Rhode Island neighborhood. This is especially useful during the peak viewing season, which usually begins in Spring.
Learn More: What Does a Real Estate Agent Do for a Buyer?
Step 3: Read Up on Local Real Estate Market Trends
Regardless of where you are buying a house, market conditions can play a key role in how much you pay. Market conditions will vary on a national, state, and even regional basis, so timing the market well can be crucial.
At the time of writing, median property prices in Rhode Island average $282,600. This represents a 12-month increase of 4.5%. Prices are expected to grow by a further 3% over the course of the next year.
In comparison to the national average, which grew by 6.6% last year, and is expected to grow by 4.1% next year, Rhode Island properties are growing at a slower pace.
This means that as a buyer, the market is potentially in your favor. An experienced Rhode Island real estate agent will be able to use this market slump to your benefit by attempting to negotiate a better price on your chosen property.
On the other hand, specific regions within Rhode Island, such as Providence, are performing much better. Properties in the city grew by 7.2% last year, and are expected to grow by 4.6%. over the next 12 months. This further illustrates the importance of timing the market on a region-by-region basis.
Learn More: Will it Be a Buyer’s or Seller’s Market in 2019?
Step 4: Get Pre-Approved for a Mortgage
If you are looking to buy a Rhode Island property with financing, then you need to consider the mortgage process. This in itself is no easy feat, as the process can be a long one. You need to remember that there is a clear difference between pre-qualifying and being pre-approved for a mortgage.
When you pre-qualify for a mortgage, the lender usually bases this on a broad overview of the information you provided in your application. This is likely to include factors such as your current salary, assets, and debt levels.
However, unlike a pre-approved mortgage application, pre-qualification does not usually require documentation, nor does the lender actively validate the information.
You should know that the average time it takes to close a property in Rhode Island (from the date an offer is made) is 30 days. It is therefore crucial that you have your financing requirements fully approved at the earliest convenience.
Step 5: Start House Hunting
When it comes to the actual house hunting process, once you’ve assessed what your underlying budget is, you then need to think about the specific Rhode Island neighborhood that you want to live in.
The location will ultimately depend on your main priorities, such as living in a neighborhood close to work or public transport links, within distance to key amenities, or in a neighborhood with strong growth potential.
There is now a range of sources you can access online to assist with this. For example, you can use the Zillow Research tool to explore median property prices, growth levels, average listing times, and more.
A more thorough process in finding the perfect neighborhood is to use a top-notch real estate agent that knows the Rhode Island housing market well. They’ll be able to sit down with you to assess what you’re looking for, and then suggest suitable properties based on your requirements.
Learn More: Free House Hunting Checklist
Step 6: Make an Offer
If you’ve found the perfect property situated in your desired Rhode Island neighborhood, it’s now time to make an offer. If you are using a great real estate agent, their first port of call will be to contact the seller's agent. This will be to ensure that the owner is yet to accept an offer, and to inquire what, if any, offers have been made.
This process is crucial for your real estate agent to determine how much should be offered. In an ideal world, your chosen Rhode Island property will of yet to receive any offers, meaning that your agent will have a better chance of having a lower offer accepted.
Once the agent has ascertained what to offer, they will then submit the offer in writing. It is likely that you will need to write a check to reserve your spot on the property. Known as "Earnest Money," the amount required is typically between 1-3% of the offer amount.
Using an experienced agent to assist with this process is invaluable, not least because you stand the best chance of obtaining the lowest price possible.
Learn More: How to Make an Offer on a House
Step 7: Inspections and Negotiations
In the next stage of the home buying process, you will need to think about arranging a home inspection. The primary purpose of a home inspection is to fully assess the overall condition of the property. The process will also allow you to identify potential issues that you were not originally highlighted by the seller.
Although a home inspection will cost you in the region of $200-$400 (depending on the size of the property), this small investment could save you thousands of dollars. The reason for this is that if an issue is identified during the home inspection process, you might be able to negotiate a lower sale price.
This is where the experience of a reputable real estate agent is invaluable, as they will have the required knowledge to assess whether or not a lower offer is possible.
Step 8: It’s Closing Time!
You’ve gone through the process of finding a property, and you’ve just had your offer accepted by the seller. You’re almost home, however, you still need to consider the process of closing the deal.
Certain costs are likely to present themselves, such as property taxes, mortgage fees, appraisal fees, and more. Although real estate transfer taxes in Rhode Island are usually paid by the seller, negotiations sometimes dictate that the fees are split 50/50.
According to a recent study by Bankrate, buyer's in Rhode Island pay an average closing cost of $2,084. This consists of $991 in origination fees, with the remainder linked to third-party fees. For those unaware, an origination fee is a fee charged by lenders in advance for processing a mortgage application.
Many of the costs encountered during the closing process are required up front, which further amplifies the importance of evaluating your personal financial situation outlined in step one.