What You Need to Know About the Home-Buying Process
Assessing each person's situation
When it comes to purchasing a home, Horton warns there's not a one-size-fits-all solution for advice.
"It really is dependent on everyone's individual situation," Horton said. "Are you looking for a condo? Are you eligible for FHA? Are you a vet? You can get a VA loan for 100% (with no down payment). There's help products out there. There's first-time home buyer products out there. You really can't take one set approach. It is a consultative approach. You can't just quote rates."
Horton recommends doing the appropriate research – on the right realtor, the right neighborhood and the right-sized mortgage for you.
"... The days of rates and donuts are gone when you'd go see a realtor," Horton said. "You want to see what kind of clients they cater to. You want to see what kind of clientele is moving in, what area they're moving into. …They might be looking for a one-bedroom condo, or … might be looking for a six-bedroom house. Look at your market. Make sure you're with the right realtor."
Education is key
Horton notes people often have misconceptions about what is required from them.
Banks don't require large down payments for conventional mortgages, often accepting lower amounts than people anticipate
"So it goes back to your education. Some people … like(a longer term loan)," Horton said. "'Here's my payment, (and I'm going to use the full term to pay it off).'" Others, however, prefer shorter term loans.
"Statistically, people own their homes five to seven years," Horton said. "You can't tell someone when they're going to move. But if you look at: the age range of their kids, are their kids going to school, are their kids going to college, are they going to be empty nesters. They're not going to keep a four- or five-bedroom house when their kids aren't there. They may (but likely won't). But it comes down to comfort on your payment too. A lot of people come in and say, 'This is what I want my mortgage payment to be. What can you do for me?'"
What can go wrong?
Sometimes when home buyers haven't done the appropriate level of research – and, in some cases even when they have – the deal falls through.
"It's kind of sad because you see people that find their dream home, they go through the process, they get approved, (the) appraisal comes in," Horton said. "…If it comes in low, it's time to renegotiate. Then you have an opportunity on the other side if that seller can't afford to sell it at that lower appraised value, the deal is done."
"The other (area) where you see them falling apart is home inspections," Horton said. "You could find your house, it could appraise out beautiful, you get your home inspected – you may find out you need a new furnace, you have a leaky roof (or) a lot of expensive items that may happen.
The buyer does have some power to help ensure the process goes smoothly, Horton notes.
"It's one of those things, even on the home buyer side, some home buyers do not listen to their lender," Horton said. "At Associated Bank, they'll come in and we'll tell you, do not go buy furniture, don't buy a boat, don't buy a car, don't quit your job before you close on your house. On your credit report right now … prior to closing, they will do a soft pull on credit. If there's alerts that there's been credit pulled, we'll have to do a full credit."
"And you do have people that will go out and make outrageous purchases and if their loan devalued, or if … their debt ratio, meaning what they make in comparison to what they spend is really tight, something pops up on their credit that they bought a new car, it could completely knock them out of the box. So it's not always appraisals or home inspections, sometimes it's the borrower not being coached right by their lender."
Ready to get started?
"There's a lot of options for people out there, we always go back to education," Horton said. "If you have education and a relationship with your banker at Associated Bank, for instance, use a hand-held approach. Don't rush into anything. Get the right advice. (It) might not be the best time to buy house. You might want to wait a little bit."
Loan products are offered by Associated Bank, N.A. Loan products are subject to credit approval and involve interest and other costs. Please ask about details on fees and terms and conditions of these products. Property insurance and flood insurance, if applicable, will be required on collateral. Member FDIC. Equal Housing Lender.