Nearly everyone’s bucket list includes purchasing a dream home. However, many people go through life thinking it can’t be done. Perhaps people feel discouraged because the process of buying a home seems complicated and daunting.
In this article, I will take you through the entire process of buying a home in Charlottesville VA. I will guide you through the process, letting you know everything you should be doing at each point of the process.
How to buy a house?
The city of Charlottesville is centrally located in the eastern foothills of the Blue Ridge Mountains in the Central Virginia region. It was established as a town in 1762 by the Virginia General Assembly and was incorporated as an independent city in 1888.
If you are planning to purchase a home here, you can start by researching early.
You can read websites, newspapers, and magazines that contain real estate listings. Take note of particular homes you are interested in and check how long they stay on the market. See if there are any changes in the asking prices. This kind of information will help you get a sense of the housing trends in Charlottesville VA.
Then, you need to determine how much house you can afford. The rule of the thumb is to aim for a property that costs about two and a half times your gross annual salary. This will help ensure that you will not be taking on a larger mortgage commitment than you can afford.
Once you’ve found a Charlottesville VA home that you really like, learn as much as possible about the property before putting in an offer. Find out how long the house has been on the market. If it has been on the market for several months with no offers, chances are it could be overpriced or it could be a slow market.
You can also look up the sales history of a home to find out how much it was previously purchased for. This will also give you an idea of how long previous owners stayed in the home.
Remember that the neighborhood is just as important as the house.
After all, there’s no point in falling in love with a home in an area you can’t stand.
Research the neighborhood you are interested in. Check out its school quality ratings, as they are often an indicator of the quality of the neighborhood. You also have to take a look at its architectural style, safety, amenities, and your commute.
What do you need in order to buy a house?
Since buying a home is a huge investment, you have to make sure that you are financially prepared. You also need to strengthen your credit score.
A credit score is a statistical number that shows a person’s creditworthiness. The credit score is used by lenders to evaluate the probability of a person repaying his or her debts. It is a three digit number ranging from 300 to 850, with 850 being the highest score that a borrower can get. If you get a high credit score, it means you are a financially trustworthy person. On the other hand, a low credit score may hurt your chances of getting the financing.
To avoid problems, check your credit report from the three major credit reporting companies. By law, you’re entitled to one free report each year. Since errors are common, it is better to check your report first before your lender does. That way, if you find inaccuracies, you can have them corrected before they affect the mortgage lending process.
So how do you strengthen your credit score? One way is by paying down your balance. Thirty percent of your score is based on the amount you owe. However, you also have to consider your credit utilization. This refers to the ratio between how much you owe compared to how much credit you have. So if you have the means, drop your credit card balances.
If you are currently not in a position to pay down your credit card balances, you can still improve your credit utilization by asking for a credit limit increase.
For example, if you’ve maxed out your $2,000 card and get a limit increase to $4,000, you will instantly cut your credit utilization rate in half. Just remember that the goal is not to spend any of your new credit. Otherwise, you will be defeating the purpose of getting a limit increase.
How can you buy a house with bad credit?
Buying a home can be a serious challenge, especially if you have bad credit. We all know that lenders prefer lending money to people who have an unquestionable track record of paying off debts because they want to make sure they will get their cash back, too. Lenders check your credit score to see how well or how bad you’ve handled your financial obligations.
If you have less-than-ideal or poor credit (a score of 650 or below), there are still options that can help you turn your dreams of homeownership into a reality. Although it may not be easy, there are still ways to get it done.
- Check your reports
It’s not enough to have a vague sense of how bad your credit score is. You need to know where you and your credit history stand. In fact, you should check your credit report before meeting with a mortgage lender. You’re entitled to a free copy of your report from each of the three major credit bureaus (Equifax, Experian, and the TransUnion) at AnnualCreditReport.com.
Make sure to check if there are any errors because creditors frequently make mistakes when reporting consumer slip-ups. If you find any, contact the institutions that provided the erroneous information and have them update it. This can help increase your credit score.
- Save up for a larger down payment
One simple solution you can do is to start saving for a larger down payment. Doing so will send a signal to lenders that you have the ability to handle the loan despite your low credit score. This will also increase your equity in the house up front, which will immediately lower your loan-to-value ratio.
- Get an FHA Loan
Another option for prospective home buyers with poor credit score is getting a Federal Housing Administration loan. To qualify, you need a minimum of 580 credit score. Aside from that, FHA loans allow you to make a down payment as low as 3.5%. However, you will have to pay a mortgage insurance premium since the federal government insures these loans.
What are the steps in the home buying process?
Preparing to buy a home can be both exciting and terrifying at the same time. Every state requires slightly different steps to purchase a home. However, they are very similar.
Here are the steps to homeownership in Charlottesville VA:
- Determine what you can afford.
Before you start house hunting, work out how much you can afford to spend on buying a house and the monthly mortgage.
- Get pre-approved for a mortgage
Getting pre-approved for a mortgage will let you know exactly how much money you have to spend. That way, you don’t waste time looking at houses you can’t afford to buy.
- Create a home wish list
You can create a list of wants and needs to help narrow down your choices for your new home. However, be flexible as you likely won’t find a home that has all the features and amenities you want.
- Choose your real estate agent
Don’t try to buy a home alone because it’s not as easy as it looks. You will benefit more from the professional assistance of a real estate agent.
- Search for Charlottesville VA homes for sale
This is the fun part of the home buying process. Make a short list and begin touring homes. Take note of what you like and don’t like about each home.
Take a look at this video that highlights the reasons why you should choose a home in Charlottesville VA:
- Make an offer
Your real estate agent will walk you through the steps required to make an offer on a home in your area. The three basic components of an offer are price, terms, and conditions.
- Get final mortgage approval
Once your offer to purchase is accepted, contact your lender or mortgage officer to proceed. Avoid making any major purchase until after the closing as that can affect your mortgage qualification.
- Order a home inspection
A home inspection is necessary to check if there are any major repairs that need to be made. A good inspector will give you advice for proper maintenance and upkeep. He will also point out potential or existing conditions that may affect the value of the property.
You may be able to negotiate your contract with the seller if you put an inspection contingency in your contracts.
- Attend the closing
You will be on your way to the closing table once all the above steps are done. While every transaction is different, expect that you will be signing a lot of paperwork.
How much do you need to save to buy a house?
To buy a house in Charlottesville VA, you need cash for a down payment and more.
It will involve upfront costs for real estate agents, lawyers, mortgage applications, and home inspections. As you move towards homeownership, you’ll have to deal with costs for closing the sale, moving, starting utilities, and insurance.
You have to start with figuring out how much home you can afford. You have to take several things into consideration such as your current income, expenses, and future goals.
Research the average price of a home in Charlottesville VA and take 20 percent of that number to get your hypothetical down payment. How many months would it take you to save up that amount?
The video below will give you ideas on how to save for a down payment:
The down payment for a home can vary from 3.5% to 20% of the total cost of a property. It will also depend on your credit score, mortgage interest rate, and your current financial situation. Experts usually recommend putting down closer to 20% as it gives you a bigger stake in the home right away.
Aside from the down payment, you also need to comfortably cover five other factors: closing costs, moving expenses, repairs and maintenance, the first few months’ mortgage payments, and your emergency fund.
Closing costs include inspection fees, property taxes and prepaid interest. Typically, homebuyers will pay approximately 2 to 5 percent of the purchase price of their home in closing fees.
You also have to think of the money it will take to get your stuff to your new home. There may also be immediate expenses brought about by upgrades and additional cosmetics and decor. Do you need new furniture? Do you want to decorate as soon as you move in?
You should also evaluate if you can honestly keep up with your mortgage in the first few months after purchase. There are some lenders who require additional cash reserves to prove that you’re able to make payments.
There are also repairs and maintenance issues that you have to take care of. One popular rule of thumb says that one percent of the purchase price of your home should be set aside each year for ongoing maintenance.
Although buying a home is a major financial goal, you should still have a separate emergency fund stocked with three to six months’ worth of living expenses. This fund should cover a financial shortfall if an unexpected expense crops up.
What are the financial requirements for a mortgage?
Mortgage underwriters consider a lot of different information to determine whether you will qualify for a mortgage. Basically, it comes down to four factors: credit, equity, income, and assets.
As I have mentioned in this article, your credit history is how a lender will judge the likelihood you’ll pay back the money you borrowed. Lenders will examine the length of your credit history to check if you have reliably paid off your loan accounts or if you’re maxed out on credit cards or loans.
Your credit score will be used to qualify you for a mortgage and will often determine the interest rate you will be offered.
Another thing that you should look into is equity. Today, equity has become one of the biggest obstacles for many homeowners. Some homeowners end up with much less equity in their homes than they did a few years ago. There are also some who owe more on the mortgage than what the house is worth.
Home equity is an asset that comes from a homeowner’s interest in a home. You can calculate the equity by subtracting any outstanding loan balances from the property’s market value. Your home’s equity can increase over time if the property value increases or the loan balance is paid down.
Your debt-to-income ratio is another factor that lenders look at to measure your ability to manage monthly payment and repay debts. Your debt-to-income ratio (DTI) is calculated by dividing total recurring monthly debt by gross monthly income, and it is expressed as a percentage.
Typically, lenders prefer individuals who spend less than 50% of their gross monthly on fixed expenses, which includes your mortgage payment, property taxes, association dues, homeowners insurance, car loans, student loans, and credit cards. Expenses like utilities, phone, and cable are not included in your DTI.
If your debt-to-income ratio is too high, consider paying down high-interest credit cards to get below the required limits.
How do I get preapproved for a mortgage?
Getting pre-approved for a mortgage loan will help you get the Charlottesville home you want.
Here is a video that briefly explains how you can get pre-approved for a mortgage:
While touring homes may be pleasant and exciting, a serious buyer should start the process in a lender’s office and by obtaining a mortgage pre-approval.
A mortgage pre-approval is basically an evaluation that determines whether you qualify for a loan.
Most sellers expect potential buyers to have a pre-approval. In fact, some sellers only negotiate with buyers who have proof that they can obtain financing.
Once you are ready to make a purchase offer, your real estate agent and the seller will want to see a pre-approval letter. Sellers prefer a pre-approved buyer because it shows that you can be taken seriously as you’ll likely be able to make the purchase.
Getting pre-approved is actually quite simple. Start by checking your credit reports and credit scores to determine what kinds of loans you may qualify for.
Your mortgage specialist will discuss your financial strategy and needs, mortgage amount, down payment, and purchase price. Upon giving your consent, your mortgage specialist will take an application. You will also have to give the lender permission to obtain a credit bureau report.
You also need to provide your lender with the required documentation, which includes the following:
- Income Information
You have to provide your loan representative with pay stubs, tax returns and W-2s from the previous two years, and documents to show other sources of income. Other sources of income may include a second job, overtime, commissions and bonuses, interest and dividend income, Social Security payments, VA and retirement benefits, alimony or child support.
- Asset Information
Aside from your income, you also need to show your lender information about assets you have. This can include bank account statements as well as information about investments you have.
- Personal Information
You also need to show a form of ID (whether a driver’s license or passport) and will need to provide your Social Security number (for a credit check).
The lender will give you a pre-approval letter, which states your loan will be approved once you make a purchase offer on a home, and submit the following documents: the purchase contract, preliminary title information, appraisal, and your income and asset documentation.
Your pre-approval is subject to your continued good credit and is usually good for 60, 90 or 120 days depending on the lender.
How long does it take to buy a house after making an offer?
Once you’ve finally found the perfect home, you and your real estate agent should put together an offer. You can even include an offer letter to show you’re really committed.
What can you expect next once your agent submits your offer?
One of three things can happen- you offer is accepted, your offer is rejected, or the seller counters your offer.
If your offer is flat-out rejected the best things to do is to move on. Put the home behind you as there’s likely too large a gap between you and the seller on what you think the home is worth. If your offer is countered, you can accept it, reject it, or make a counter offer in return. You can agree to the counter terms or counter back by modifying your terms slightly.
If your offer is accepted, then you have to prepare to make sure you can close your transaction without any unnecessary delays. Having a good REALTOR® will help you avoid issues that might jeopardize your home purchase.
Once accepted, you will have to start your financing. You should also schedule for a home inspection and satisfy all contingencies in your contract to move forward to your closing.
Cash transactions can close in 15 days, while financed transactions might take 30 to 45 days.
Here are four things that you should accomplish in order to get to the closing table:
- Get your financing in order
It’s time to move forward with your lender on the amount of money you need to purchase the house. Your mortgage broker will help you in accomplishing the necessary paperwork that most lenders require. As part of the process, your lender will also require an appraisal by a licensed appraiser and will usually inform you when that needs to happen.
- Get a home inspection
Although it isn’t required by most lenders, having the house examined by a licensed property inspector is a good idea. Depending on what the inspector turns up, you might ask the seller to make some fixes or ask for a concession. If there are serious defects, there could be grounds for nullifying the purchase agreement.
- Secure homeowners insurance
Before approving your loan, most lenders will require you to sign up for homeowners insurance. Shop around and negotiate. If you want to save money, you can bundle your homeowners insurance with any other kind of insurance you have.
- Move toward the closing
The property must have a clear title for a clean exchange of ownership. Consult with a real estate attorney who can explain the title report to you. Your lawyer will also make sure everything is in order with the closing documents.
Do a final walk-through of the home with your real estate agent. Make sure nothing has been damaged and that all changes specified in the contract were completed.
How do you close on a house?
The closing is the home stretch of the home buying process. Also known as settlement or escrow, it is the day when all parties will sign the papers to officially seal the deal. Ownership of the property will be then transferred to you.
Before the final step of your real estate transaction, make sure to review your closing disclosure form. This will help ensure that you understand the terms of your loan.
Do a final walk-through a day before closing to make sure the home is in the condition agreed upon in the contract. If you had a home inspection done earlier, make sure any issues that the sellers agreed to fix have been repaired.
What to bring to closing:
- All paperwork
On closing day, bring your proof of homeowners insurance, a copy of your contract with the seller, your home inspection reports, anything the bank required to approve your loan, and a government-issued photo ID.
You also need to bring all the paperwork you have received throughout the process. This includes the loan estimate, the contract, the proof of title search, and insurance, mortgage insurance, home appraisal, and closing disclosure. During closing, you might need to refer these documents.
- The down payment
Your disclosure form will tell you exactly how much you have to prepare for a down payment and closing costs. Before closing, ask whether you should wire transfer the funds or of you will need to bring a cashier’s check. You should also bring your personal checkbook in case any unforeseen expenses come up.
What should you expect at closing?
There will be many people present at a closing. They include the home seller, the seller’s real estate agent as well as your own, buyer and seller attorneys, and a representative from a title company. Sometimes, a representative from the bank or lender where you got your loan also makes an appearance.
A title clearance is also needed before you can own a home. Most lenders will require a title search of public property record to make sure there aren’t any issues with transferring the property into your name.
You will also be signing your name a lot as there will probably be at least 100 pages of paperwork. The legal documents fall into two categories- the agreement between you and your lender regarding the terms and conditions of the mortgage and the agreement between you and the seller transferring ownership of the property.
Although there are a lot of intimidating legal documents to sign at a closing, do take time to read and don’t be afraid to ask for clarification if there’s anything you don’t understand. Remember that the fine print will have a major impact on your finances and your life for years to come.
During closing you will receive the following documents:
Closing Disclosure
This document contains the details of the mortgage loan, including the loan terms, estimated monthly payments, and closing costs. The lender is required to give the Closing Disclosure to you at least at three business days before you close on the loan. This is to give you time to compare the Loan Estimate with the Closing Disclosure.
Mortgage Note
This document contains your promise to repay the mortgage. It also includes the amount and terms of the loan. The mortgage note will also state what the lender can do if you fail to make payments. ‘
Mortgage or deed of trust
This is the document that pledges the property as security for the loan. It also gives your lender a claim against the property if you fail to make the monthly payments.
Certificate of Occupancy
You need this document if you are buying a newly constructed house. It indicates that the home is in a condition suitable for occupancy.
Once everything is done, you will leave with a stack of documents and the keys to your new home.
Do you have to have a real estate agent to buy a house?
There are no laws requiring you to use an agent when purchasing a home, so why bother?
Working through a real estate purchase is a tricky business. While the internet has made it possible for you to do a lot of legwork yourself, there’s still no substitute for an experienced real estate agent.
Trying to buy a home without a real estate agent can lead to serious consequences. You may discover that the potential problems of going solo outweigh the possible benefits.
- You’ll have to deal with a mountain of questions and paperwork
Attending open houses and browsing house ads online is one of the most exciting stages of purchasing a house. However, after the excitement fades, you’ll have to deal with lots of questions regarding cleaning up your credit report and securing financing on your own.
Then, you also have to consider the legal documents needed during your house closing. Real estate law is complex and varies from state to state, city to city, and county to county. To avoid legal troubles, you must obey the letter of the law. You also need to complete all necessary paperwork correctly, accurately and submit it on time.
Legal mistakes and missing deadlines can lead to serious, long-term expensive headaches. With an agent, you simply read and sign the papers prepared by your agent for you.
- Buying a house can take more time than expected
Without an agent, you have to invest countless hours in research before making an offer. You’ll have to learn about the projected cost of utilities, the local zoning restrictions, and many other things.
Aside from that, when viewing a home without an agent, it is solely up to you to determine the physical condition of the property. Are you confident in your ability to assess the house with the same attention to detail of a real estate agent?
A real estate agent can go beyond the aesthetics and tell you important details about homes you’re considering. An agent can also help you get a home’s Comprehensive Loss Underwriting Exchange report, or CLUE. This document can provide you with the history of the property including dates of claims, cause of loss, amount paid, and more.
- No knowledge of the neighborhood
Picking the right neighborhood is important as it will have a significant impact on value, as well as resale potential down the road. Keep in mind that you are not just buying a physical home, you are purchasing a property in a particular area.
Without professional help, it’s tough to know the ins and outs of a particular area, whereas having an agent working in Charlottesville VA on a daily basis can be a source of information.
Considering the amount of money you are going to spend, it is worthwhile to know what you’re getting and if it fits your goals for ownership.
- Paying too much
It is hard to determine the true value of homes you are looking at. Most of the time, homeowners tend to overestimate the value of their homes. The owner can choose any price, and without an agent, you will not have a way to verify the validity of that price.
Without an agent, you are likely to pay more than you should. With an agent, you have a professional who can analyze the home’s market value and tell you if the house costs too much.
The benefits of having a buyer’s agent are immeasurable. A real estate agent can save you time, money, and heartache by helping you make the right decisions. An exceptional buyer’s agent will represent your best interests.
What does a buyer’s real estate agent do?
A buyer’s agent assists home buyers every step of the way. Without one, it takes time to find and buy a home. In other words, a buyer’s agent is your ally.
You are making a huge purchase so make sure you hire an agent who is competent. Your agent will guide you, help you avoid potential pitfalls, and in the end, hand you the keys to your new Charlottesville VA home.
You need not worry about the expense of hiring a buyer’s agent because it’s the seller who will pay the commission.
Here are some of the things a buyer’s agent can do for you:
Get a clear picture of your requirements
A good listener is an important trait of an excellent buyer’s agent. A buyer’s agent should first listen to your needs, desires, goals, and wants. Think about what style of home fits you best. The agent will also help you identify the best locations that fit your budget and lifestyle needs.
Get you pre-approved
Your agent should have a network of trusted professionals involved in the home buying and selling process. Before you start looking for homes that are for sale, your agent should first connect you with a trusted lender.
You need to be pre-approved so that you will have an idea how much you can spend. Remember that getting pre-approved means that the lender has already verified your income, employment, and run your credit.
A good buyer’s agent will insist upon having a solid pre-approval letter.
Find the right property
After determining what you are looking for and what you can afford, the buyer’s agent will schedule appointments to tour homes that meet your needs and wants. Your agent will also discuss information about the various properties and neighborhoods to help you decide which home is right for you. Your agent will also counsel you on location, transportation, schools and other factors.
Negotiate the offer
Having a great buyer’s agent is beneficial because he or she has the ability to negotiate the best price for your home purchase.
Your agent will analyze the value of the home you are looking to purchase and help you come up with an appropriate price to offer. Your agent will also advise you on how to proceed accordingly when the seller responds.
Recommend other professionals
Your agent should also be able to refer you to other professionals such as mortgage brokers, real estate attorneys, home inspectors, movers, and more. This will help speed up the home buying process.
Your agent should know the best home inspectors in the area and help you choose one that you can depend on to give you the true condition of any home you are interested in buying. Your agent can also advise you on any additional inspections that may apply to the home you are looking at, including radon, mold, water, and lead paint.
Attend home inspections
Your buyer’s agent should be present at the home inspection so that he or she will hear exactly what the home inspector finds.
Once you receive the home inspection report, your agent will counsel you on what should be brought to the seller’s attention.
Help overcome setbacks
If certain issues come up, your agent can advise you on how to proceed. Just in case the negotiations become heated, it’s helpful to have an experienced real estate professional who can offer productive solutions.
Finalize all loose ends for the closing
There are a surprising number of details involved in a closing. All of these things need to be finalized before you can officially become the owner of the home. Otherwise, the closing may fall through.
Your agent will finalize all the loose ends so that the closing goes through without a problem. He or she will be there alongside you at the closing so you have support and advice, should you need it.
Let me help you find your dream home in Charlottesville VA!
Call me, Pam Dent, at 434-960-0161. My years of experience and expertise in helping buyers and sellers in Charlottesville VA will definitely help you in finding the best home that suits your needs. You can be sure to receive a first class real estate experience with me!
Pam Dent
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