Buying Property & Real Estate

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Deciding whether to buy a house is one of the biggest financial decisions you’ll ever make. Not only is it a huge financial decision, it’s an extremely emotional one as well. Buying a house can also be unpredictable and the real estate market is constantly changing. Whether you’re a first-time buyer or looking to make a strategic investment, navigating such a market requires knowledge and careful planning. Sierra Vista Realty is here to provide you with step-by-step instructions on how to buy a house in Southern Arizona successfully.

Check Your Financial Health. One of the most crucial things to know before looking for houses for sale or buying real estate is financial preparedness. Here are a few things you need to do to ensure you are financially ready to purchase a home in Sierra Vista and Southern Arizona:

Calculate Your Home Affordability: Use home affordability calculators to understand your financial preparedness. These calculators take into account your income, debts, location, and down payment. You’ll be able to determine your monthly mortgage payment and other costs of homeownership.

Check Your Credit Score: You must check your credit score which decides the mortgage rate: higher credit score, lower interest rate. Pull your credit score reports from any of the three credit bureaus – Equifax, Experian, or TransUnion – that offer one credit report for free annually. You can also work with your bank or credit card company to access your credit report for free.

Prove a Steady Employment History: Your lender will study your employment history to ensure safe investments. Lenders or mortgage brokers will check your job profile, work history, and family background. A stable employment history will help you get a home loan quickly.

Review Your Debt to Income Ratio (DTI): You can calculate your DTI ratio by dividing the monthly debts by gross monthly income. Arizona mortgage lenders use DTI to evaluate the mortgage amount they can lend you. Most lenders consider a DTI of 36% or less to be safe.

Plan Your Down Payment and Closing Costs. It’s time to plan your down payment after knowing how much house you can afford. A 20% down payment is typically the norm, but you can choose your own amount. The average down payment on a house depends on the type of mortgage you opt for. Your lender may require you to purchase private mortgage insurance if you put down less money upfront. Southern Arizona buyer closing costs may come as a shock for first-time buyers. Like a down payment, closing costs are out-of-pocket expenses you pay to finance, buy, and own a house. Budget 2% to 4% of the total purchase price for closing costs. If you are looking to buy a house with cash, you can skip Steps 3 & 4. 

Get the Prequalification Letter for Your Mortgage. While most homebuyers kick off their search by browsing listings online, it's smart to get pre-approved for a loan before you start. The mortgage prequalification stage in the house-buying process determines how much money you can borrow to purchase a home in Sierra Vista and Cochise County. A Prequalification letter shows you are a serious buyer working with lenders to finance a house. Before you apply for prequalification, you need to know the types of home loans and which one’s the best for you:

Conventional Mortgages: A conventional mortgage is a loan not backed by a government agency. You can get a conventional loan from private mortgage lenders in Arizona. It is subject to their guidelines, down payment requirements, credit score criteria, and interest rates.

FHA Loans: Federal Housing Administration grants FHA loans to borrowers having lower credit scores and higher DTI ratios. Remember, low credit scores = higher interest rates.

VA Loans: United States Department of Veterans Affairs offers VA loans to veterans. With no down payment and lenient credit requirements, you can even get a VA loan with bad credit.

USDA Loans: Low to moderate-income home buyers in rural areas can apply for USDA loans. They offer zero down payment loans, but you need to cover the USDA closing costs of 2% to 6%.

Reach out to your Sierra Vista Realty REALTORⓇ and Start Your Home Search. Sierra Vista Realty has some of the most experienced agents to help you through the process. Here are a few things you should keep in mind while shopping for homes:

See Homes In-person: Viewing property listings online is only the first step. You need to see the shortlisted properties in person. A personal visit will help you visualize your future in the home and also give you an idea about the neighborhood.

Keep Your Schedule Open: Ensure you have free time to see the newly listed properties.

Make an Offer Work on making your offer appealing after finding a home you want to buy. Your offer should include the offer price, preapproval letter, and proof of funds for the down payment. 

Additionally, include contingencies and terms of purchase. Home buying contingencies usually include a home appraisal, property inspection, etc. You can waive some contingencies or offer cash to make your offer attractive to home sellers. In most cases, home sellers make counteroffers. You can negotiate, accept, or reject the counteroffer. After the seller accepts your offer, both parties will sign the purchase agreement and open escrow. You will need to put an escrow deposit of typically 1% of the purchase amount in the escrow account. 

Schedule a Home Inspection and appraisal. With a home inspection, you can identify any issues or defects present in the property. You need to hire a home inspector to inspect the property and make the report. A home inspection report will highlight structural or mechanical issues, if any. Based on the report, you can ask for repairs from the home seller. Or back out of the deal if the property has severe damages. Your mortgage lender will require you to get the property appraised. A home appraisal will prevent them from lending an amount greater than the fair market value. The lender will hire a professional home appraiser to appraise the property and come up with its current market value. The lender will lend the loan amount equal to the appraised value. In case of a shortfall, you may raise the down payment or re-negotiate the offer.  

Close the Sale. After all the contingencies are met, and you are satisfied with the final walk-through, it’s time to close the deal. It is the last step in which you pay the closing costs, sign the paperwork, and get the keys. Three days before closing, your lender will give you the closing disclosure. It contains all the details of your mortgage, such as mortgage type, monthly payment, loan term, rate of interest, mortgage origination fees, the money you need to bring at the closing, etc. You will attend the closing with your agent at the title company. This is when you will wire the closing costs and down payment to the escrow, which will then transfer it to the seller after making the necessary deductions.  

Did you know the average timeline to close on a home is 45 days after you open escrow.  

In conclusion, with an ever-changing real estate market the old saying “the best time to buy a home was yesterday” still rings true. Do not try to time the market. Sierra Vista Realty has the experience to help you and with careful planning, you can confidently embark on your journey to homeownership.