Buyer’s Guide Alabama | Method Real Estate Advisors

Your Home Buying Guide

What’s Your Budget?

Figuring out how much house you can afford is the first step to owning your own home. Look at your household income, monthly debts, redit score and your available savings to get a general idea of your current situation. Down payments are generally between 10-20% of  the purchase price, so you’ll want to make sure your savings can cover that amount up front.

DEBT TO INCOME RATIO

There are two ratios lenders look at to determine loan approval.

Front-End Ratio

Housing Expenses Percentage

( Monthly Housing Expenses / Gross Monthly Income ) x 100

Back-End Ratio

Total Debt Percentage

( Monthly Debt Expenses / Gross Monthly Income ) x 100

GETTING PRE-APPROVAL

A pre-approval letter is provided by a
lender and is typically provided
alongside an offer to assure
the seller that you have the ability to
acquire the necessary financing.

28% / 36% RULE

A typical rule of thumb for mortgage
payments is to keep them at no more
than 28% of your monthly income. Your
total debt expenses should be no
more than 36%.

Types of Loan Financing

CONVENTIONAL LOANS

Typically fixed-rate mortgages, conventional loans tend to have stricter requirements for approval. You will need to be able to provide a higher down payment, have a high credit score and low debt-to-income ratio. These loans are usually less costly than other loans that are guaranteed by the federal government. These tend to be the most common loans applied for by the average American.

FHA LOANS

FHA Loans are provided by the Federal Housing Administration as a program for American’s seeking home loans with lower down payment options and lower requirements for approval. FHA loans tend to be great for first-time homebuyers due to the minimum down payment amount of just 3.5%. However, FHA borrowers must pay a mortgage insurance premium that is rolled into their monthly mortgage payments. This is to protect the lender in case the borrower is unable to meet their mortgage obligations.

VA LOANS

VA Loans are another government guaranteed loan available to Veterans. Usually these loans can be approved without a down payment requirement. You must request eligibility from the Department of Veterans Affairs and obtain a certificate of eligibility to be considered for this loan type by lenders. Many local programs may offer similar assistance as well.

Searching & Touring

Internet Home Searches

Now that you know your budget and have pre-approval in hand, its time to start the hunt for your dream home!

We highly suggest using our internet search tool on methodatlanta.net to locate current properties for sale. By using our site, you are provided with real-time updates on actual property listings. Our agents can personalize your search based on your preferences, so don’t
hesitate to reach out!

Scan this QR code to setup a customized home search on methodatlanta.net

 Schedule a Tour

It can be hard to tell what a house will actually look like until you physically step inside. See something online that you like? Reach out to your agent today and ask for them to request a tour of the property.

Scheduling a tour is simple and easy, and our agents are always prepared to be flexible. They work hard to balance showings around your schedule, no matter how busy life gets.

*Note that some listing agents (sellers agents) will require a tour prior to
accepting an offer. This is called a “No Blind Offers” situation

Submitting an Offer

1

Purchase Price

The offered purchase price of the property will be determined by you and your agent based on the current market value and circumstances surrounding the property and seller’s situation.

2

Closing Date / Possession Date

The closing date is typically within 30 days of offer acceptance. You can discuss with your agent on your exact needs for scheduling your closing. Often times possession will take place at the time of closing, but special circumstances can cause possession to take place at a later date. The possession date will be stipulated on your contract.

3

Earnest Money

Earnest money is customarily around 1% of the total purchase price. Earnest money is held by a specified holder, usually the closing attorney or agent’s brokerage. Earnest money is refundable to the buyer up until the last day of the Due Diligence period (more about that below).

4

Seller Paid Closing Costs

Closings Costs include attorney fees, closings fees, transfer fees, and any other potential fees associated with the closing of the property. When submitting an offer, you can specify how much you would like the Seller to cover for Closing Costs. Typically closing costs will range between 3%-6% of the purchase price.

5

Due Diligence Period (Inspection Period)

The due diligence period specified in the contract will begin upon offer acceptance. During the due diligence period it is recommended to do a full inspection of the property to become aware of any potential issues and prevent loss of earnest money in the case the contract requires termination.

6

Special Stipulations

Special stipulations are requirements outside the typical contract that are added by the buyer’s agent on behalf of the buyer. Examples of special stipulations include escalation clauses, requirement of appliances to stay with property, etc.

7

Unique Circumstances

There are some situations where unique circumstances will arise. Some unique circumstances include additional contingency on the sale of buyers home, temporary occupancies, etc.

Offer Accepted!

Now What?

DUE DILIGENCE PERIOD

Due diligence will start once the contract has been signed by all parties. During the due diligence period you will have the right to inspect the property to identify any potential issues and discuss necessary repairs with the seller.

APPRAISAL CONTINGENCY

The appraisal period will be stipulated by your lender prior to offer submittal. During this period your lender can request an appraisal of the property. If the current price differs significantly, the seller may have to agree to lower the price or have another appraisal done to prevent the bank from declining to finance the house.

FINANCING CONTINGENCY

The financing contingency period allows for a specified amount of time for your lender to ensure your loan is officially approved and able to be funded. A loan denial letter will need to be submitted to terminate prior to the end of the contingency period.

Potential Out-Of-Pocket Costs

Aside from your down payment and earnest money costs, there can be additional up-front costs associated with closing on the property from the time the property goes under contract. A detailed list of potential  costs is provided below.

Note that most of time agent commission is paid for by the Selling party, but in rare circumstances commission payment may need to be provided by the buyer. Please refer to your buyer brokerage agreement and inquire with your agent for more details.

APPRAISAL COST

A typical single-family home appraisal can range between $300 to $450.
This can vary depending on size of the home, value, and level of detail during the appraisal.

HOME INSPECTION

The average home inspection can cost between $300 – $500. If the home includes additional features such as barns, private wells, etc. this can increase the price of the inspection.

CLOSING COSTS

Closing costs range from 3%-6% of the total purchase price of the property. You can stipulate in your contract how much of these closings costs you would prefer for the seller to cover.

Congratulations!

Closing Time?

Closing Process:

  • Payment of any remaining closing costs
  • Seller and Buyer will sign final documentation
  • You will receive a Settlement Statement of all costs

 

Don’t forget to bring:

  • Photo identification
  • Any outstanding documentation
  • Personal checkbook/cashier’s check