Read Time: 8 Minutes|
November 19, 2021
Search. Scroll. Click. Add to cart. Nowadays, nearly anything is easily purchased online with just a few clicks of the mouse and few taps on the keyboard. In an instant, you can find what you’re looking for, then buy it. Much of the way we shop has been digitized. And turns out, the home buying process has followed suit, paving the way for a fully digital, online house shopping and buying experience. Well, almost… Hear us out.
The reason you’re here may be that you’re trying to understand the latest developments and trends in the mortgage and real estate industries, or maybe you’re wondering how exactly buying a house online is possible. Whether it’s a move for a job, relationship, or new adventure in life, or strictly because of pure convenience, more and more home buyers are choosing to find their dream home online. Let’s dive deeper into the how-to.
Before you dive into the browsing homes, it’s smart to narrow down how much house you can afford – from a lender’s perspective and your comfort financially. A good place to start is by gaining an understanding of the terms and costs associated with buying a home:
A mortgage payment is broken down into two parts, P&I. The principal (P) is the loan amount borrowed from the lender and the interest (I) is the “cost” of borrowing money from the lender. In addition to P&I, the monthly mortgage payment can include other expenses, including property taxes, homeowner’s insurance, and mortgage insurance. It’s important to note that mortgage insurance requirements vary based on the loan type and a borrower’s current financial situation.
Check out this calculator to get an idea of how much money you may be able to finance into a mortgage based on your desired down payment, interest rate, and monthly mortgage payment.
Whether you’ve plugged in numbers of your own, done your own research on various loan types, or have come up with a budget on your own, at the end of the day, a lender plays a huge part in how much house you can afford. That’s why it’s a smart move to get pre-approved for a loan amount. From there, you can re-evaluate your comfort level regarding your finances, including how much money you would realistically want to put down or allot towards your monthly mortgage payment.
A lender can pre-approve you for a loan amount based on information, documents, and a thorough review to set you up for home buying success. When you are pre-approved for a loan amount upfront (even before home shopping begins), your information is reviewed and verified at the beginning of the loan process. By having the file underwritten before an offer is submitted, closing is faster and easier.
The pre-approval process at Newrez is straightforward, simple, and easy on you. Here’s a high-level overview of what to expect: You provide basic information, documents for proof, and let the team review behind the scenes. The team keeps you updated every step of the way, reaching out for additional information as needed. Then, you receive your pre-approval letter! If you’re ready to get pre-approved, prepare to have documentation ready to submit to your lender, including:
For more information on pre-approvals, head to our blog that dives into more detail.
So, you may be wondering… If you buy a house online, do you still need a real estate agent? The answer is no. Ultimately, it’s your choice whether you work with a professional, regardless of how you plan to house hunt. There are pros and cons to hiring a real estate professional. For inexperienced home buyers, working with a professional typically saves time, espeically when it comes to performing market research, finding out answers to questions that inevitably arise at some point during the process, and even the house search itself. Real estate agents have:
On the other hand, if you choose to pursue your homeownership dreams without a real estate agent, there are benefits to consider with this route as well. If you prefer to make decisions yourself, you have the freedom to do so. You can work with a seller directly and remove any middleman along the way (which comes in handy if you’re purchasing from a close friend or family member). You also may be able to negotiate your way to saving money on the traditional 5-6% of the sales price that typically goes to the agent(s) involved with the property.
While the majority of home buyers work with real estate agents on their home purchase, there are still plenty of home buyers who buy (and sell) homes without a professional by their side. Either way, researching the advantages and disadvantages before you decide can help you make the most informed decision, and more importantly, the right decision for you.
We’ve outlined more pros and cons of buying a house without a real estate agent in this article.
Finally – we’ve made it to what is arguably the most fun part of buying a home: looking at different homes on the market to find the one for you! Our home search tool, Xome, makes filtering, narrowing down your options, and clicking on your perfect home easier than ever! Xome gives you options to search by city, zip code, school district, or MLS (listing) number.
Another “before buying” to-do to focus on is compiling a list – mental, physical, or digital – of your ideal home. These are the factors that can help you determine which homes will check your boxes and simultaneously make you happy in the long run.
A good place to start is with needs and wants. Maybe you prefer an open floor plan. Or you can’t live without a pool in the backyard. Or you must have at least four bedrooms to accommodate your children and family when they come in town. Or you only want to live in a brand-new home that you know will have minimal upkeep for the foreseeable future. Other factors to consider include living in a specific neighborhood, whether it’s based on proximity to work or because of a particular school district.
Regardless of how seemingly big or small, hammer out a list of everything you want in a home, then figure out which factors are definite needs and which are bonuses and wants.
It’s important to note that while yes, you’re setting out to settle into the home of your dreams, if you’re looking in a competitive area or housing market, finding everything you want in a home down to the smallest detail, may not be feasible.
While sometimes nerve wracking because of the anticipation surrounding a seller’s response and decision, submitting an offer letter can be emotional, but it’s also important to remain pragmatic. Home offers should be in the form of a purchase and sale agreement. If you choose to work with a real estate professional, your agent takes care of the paperwork for you, then you sign prior to its submission.
Before your home purchase is finalized, two major steps to complete in most cases (and that are required by most mortgage types) are the home inspection and appraisal.
According to the American Society of Home Inspectors, “a home inspection is an objective visual examination of the physical structure and systems of a house, from the roof to the foundation. On average, a single-family home inspection usually takes 2-4 hours to complete, though this is heavily dependent on the of the size and condition of the home. After the inspection process, the inspector will send the client an inspection report (often within 24-48 hours) that covers their findings, complete with pictures, analysis and recommendations.”
According to Inman, “An appraisal is the estimation of a home’s current market value. A licensed appraiser completes this estimation, which is calculated by comparing the recent sales of homes in the area as to the property that is being appraised. This is required by mortgage lenders to be sure that the money they are lending to a new homeowner or a current homeowner is a fair amount for the home. The lenders want to be sure that the buyers are not overpaying for the property.”
Note: Your loan officer can help you understand how and when it’s time to schedule and/or order both!
Closing the deal has two meanings when buying a home. Your home purchase is finalized when you sign the contract (after any negotiations are worked out with the seller) and when you sign all necessary documents to finalize the mortgage. Often, this is referred to as “closing day.” The best part? Closing day is when you officially get they keys to your new home!
Whether you choose to shop online or in person for your new home, know that Newrez is here to help you every step of the way!