Yes, we always recommend pre-approval as the first step when you begin your property search. Meeting with a lender to obtain a pre-approval letter will help establish how much you can afford. Of course, just because you qualify for a mortgage of a certain amount doesn’t mean that you should borrow up to that limit. Many buyers decide that they are comfortable with a mortgage well below the maximum loan amount that they qualify for. This is something you, as a buyer, will have to determine after reviewing your income and debt levels. You should also take into consideration any changes in spending you may anticipate in the future due to planned life changes (i.e. having children or going back to school for an advanced degree).
Another thing to note is that, as part of the pre-approval process, the lender will pull your credit score. This may bring to your attention any credit issues. Sometimes there are issues you may not even been aware of or you thought had been resolved.Finally, a lender will advise you of any home buyer programs that are currently available. There are often fantastic programs for first-time buyers, first responders, doctors, government employees, etc.
An earnest money deposit is a payment the buyer puts down after the contract is ratified. This deposit is often called a ‘good faith deposit’ as it shows the seller you are a serious buyer committed to purchasing the home. The deposit is typically held in a trust account by either the settlement company or the buyer’s broker. Deposits are typically 2-3% of the purchase price, but market conditions can affect the size of the deposit amount. In a competitive market with multiple offers, buyers will often put down even larger amounts to improve the appearance of their offer.At closing the deposit amount is deducted from the final amount the buyer must bring to settlement. Note that if a buyer withdraws from a contract outside of a contingency period they could put the earnest money deposit at risk. However, if a buyer voids a contract within a contingency period, the deposit would typically be refunded in full.
In order to determine the condition of the property, you may elect to perform a home inspection. This is strongly recommended to any buyer as the home may have defects which are not obvious but may be spotted quite easily by an experienced home inspector. Additionally, the home inspection may bring up issues that require further analysis from a specialist, such as a chimney company or a structural engineer. The home inspection is generally set-up as a contract contingency which gives you a set period of time, such as 7 days, to perform an inspection of the property. By the end of this time period, you would have the option to either: proceed with the purchase as is; negotiate for a credit or repairs; or back out of the contract.In addition to a home inspection, you may also wish to perform one or more of the following inspections- radon, mold, lead based paint, and wood-destroying insect. These are not the only types of inspections available. The kind of inspection you may want to do often depends on any particular concerns you may have about a specific property.