Steps to The Home Search Process
Create a Budget
Start by determining how much home you want to afford. Under "Get Pre-approved" (below) will show you what the lender can approve you for, but what's more important is what you're comfortable with. After you've defined the amount you want to afford, you'll need to budget for the additional items outlined in Steps 2 thru 4 and total them up. Then, you'll average these figures over a 5-year period. By taking the time to prepare a 5-year budget, you'll have a good idea as to how much of your income you can comfortably allocate to a mortgage payment - not just next month, but several years from now, as well.
1. Prepare Your Budget
In preparing your budget, remember to account for things such as the possible growth of your family and the maintenance costs associated with home ownership. Calling the landlord when the hot water heater quits is about $1,500 less expensive than calling the plumber as a owner vs a renter. In addition, you'll want to budget for annual increases in property taxes and home owner’s insurance.
2. Make a List
Make a list of your “Must Have Items" and your “Like to Have Items". This could include not only things like a fenced yard and 2 car garage, but also things such as schools, work, and (very important) the distance to our area lakes. :) Again, keep in mind that you'll likely be in the home for at least five years, so try to think about the ways that your new home will need to accommodate you and your family over that period of time.
3. Up Front Costs
Budget for up-front costs. In addition to your monthly mortgage payment, you'll need cash for the down payment, closing costs, appraisal fees and home inspection fees before the transaction is completed. These amounts vary significantly depending on the type of financing you select, so make sure that you have determined the amount of “up front” cash you'll need.
4. Get Pre-Approved
This will show you the amount your lender has qualified you for, along with what your estimated interest rate will be. You'll need this info to fine tune your monthly payment calculations. And, by having a pre-approval to share with the seller when you make your offer, you'll be in a better negotiating position. This can be very beneficial if the home you choose has more than one buyer offering on it. And remember, there's a difference between a pre-approval and pre-qualification.
There are basically two ways to approach this, both of which use what is known as a "Mortgage Multiplier".
1. Is to already know what interest rate you qualify for as well as what you want your monthly payment, including taxes and insurance to be. Using these figures, you can determine the price “range” of the homes you should look at to stay within your selected payment amount.
2. Is to have an idea what price range home you want to look at, and then determine the payment for that price.
As mentioned above, both can be calculated using the “Mortgage Multiplier”. This number is arrived at by combining your interest rate in combination with the amortization rate (an amortization rate is simply the number of years you have to pay back the loan).
Example: using an interest rate of 4.5% and an amortization rate of 30 years would give us a Mortgage Multiplier of 5.07.
Using Way #1: if I know that I want my total monthly payment to be $1,200, out of which the estimated monthly property taxes are $100 and the estimated monthly insurance is also $100, we're left with $1,000 monthly to pay the principal and interest. By dividing $1,000 (my principal and interest payment amount) by 5.07 (my mortgage multiplier based on 4.5% interest amortized over 30 years) I can determine that I will be able to buy a $197,000 home.
Using Way #2: I start with a home price of $200,000 and then multiply the $200,000 by 5.07 (my Mortgage Multiplier) to arrive at a monthly Principal and Interest payment of $1,014. Now I add the tax amount of $100 and the insurance amount of $100 to the principal and interest amount for a total monthly payment amount of $1,214.
You can find Mortgage Multiplier numbers by clicking on this link: www.hsh.com/mopaytable-print.html
6. Begin your search!
Now that you are armed with your Pre-Approval, your list of “Must Haves” and “Like to Haves” and a defined price range, you are ready to begin your home search. You can expand and narrow your search criteria to get a good idea as to how many homes may work for you. Using our up to the minute information on our website, you or our agents at
At BransonHouse.com you can easily create an account to set up personal email alerts to notify you anytime a new home hits the market that meets your criteria, as well as keeping you apprised of price and status changes to any of the existing homes you may have viewed.
Once you have found the home that meets your needs, now you are ready for the next series of steps - "Submitting an Offer". You can view "Steps to Submitting an Offer" by clicking on this link or go to the Buyer Info tab and select Submitting an Offer.
We welcome your questions and comments, so please don't hesitate to contact us if we can be of any assistance.
As always, we look forward to hearing from you!