How do I buy a home in Alabama?

What can you reasonably afford?

Before getting started you should figure out how much you can afford and seek financing if it’s needed. You should have a good understanding of what you can comfortably spend. Most lenders will take into consideration many factors when considering you for a financed real estate purchase. The size of your down payment, job stability, existing debts, credit and payment history are the largest factors. Knowing what you want to spend and your credit status especially when you begin talking to lenders will prove beneficial.

Selecting a lender

You may want to select a lender before beginning your process. While there are some buyers who do pay cash for a new home, most will need to find financing. Pre-qualifying before house hunting puts you ahead of the game. Knowing how much home you can afford and what you qualify for is a great step. Each lender is different so be sure to choose one that will work with you and your circumstances. Some type of lenders to consider include: Independent Mortgage Companies, Savings Institutions, Commercial Banks, Morgtage Brokers, Credit Unions, Employers and even your Union. You will also need to decide on which mortgage is right for you. Below is a list of common mortgages you are likely to see. Most of all, be sure to ask questions. A sign of a good lender is one who is happy to answer all your questions, explains what type of loans you qualify for and is willing to satisfy all your concerns.

Fixed Rate Mortgage – This is the standard mortgage model. It is the oldest and most easily understood type of mortgage. It offers for the interest rate and the amount of payment to remain fixed for the life of the loan, typically either 15 or 30 years. However, if rates fall the holder cannot benefit from the new lower rate unless refinancing.

Adjustable Rate Mortgage (ARM) – This mortgage has your rate rise and fall along with rates/changes throughout the economy. Therefore you assume the risk of rising rates and you stand to benefit from falling rates.

Convertible Option - FRM and ARM represent the primary options available to homebuyers today. The convertible mortgage represents something of a compromise between the two. It is designed for those who want the advantages of the ARM, but also want to limit the risk of rising rates Under this arrangement, the buyer starts out with an ARM, but has the option of converting to an FRM at specified points during the loan term.

Federal Housing Administration Insured Loans (FHA) - FHA, also known as the Federal Housing Administration, operates under the control of the Department of Housing and Urban Development (HUD) and has the primary responsibility for administering the government home loan insurance program. This program allows buyers who might otherwise not qualify for a home loan to obtain one because the risk is removed from the lender by FHA.

VA Loans – Veterans Affairs Loans fall in the FHA category and have the most advantages of FHA loans. They are only available to veterans of the armed services, those currently in the service and their spouses. VA loans are typically half a percent or more below the market rates and they can be obtained with no money down.

Should you use a real estate agent?

There are two sides to every sale – a sellers side and you, the buyers side. The Seller is represented by a listing agent and the buyer can be represented by a selling agent. Usually commissions to both agents are paid by the seller. You as a home buyer should want to have an agent to represent only your interest and should hire your own agent. It’s a great choice because buying a house is a huge investment and you need an expert on your side guiding you through pitfalls, unforeseen snags and helping you make a well educated choice. Think of them as your guide through a safari.

Choosing the best real estate agent for you

You should choose an agent you are comfortable with and who understands what is important to you. They should compliment your personality and be willing to go at this journey assisting you every step of the way. Be honest about your expectations. Consider interviewing 2-3 agents before making your decision. If you need names of some great local agents, we would be glad to provide you with names of several in your area.

Some good guidelines in choosing an agent are:

• Find what town/community you would like to move to and consider an agent from that community.
• Seek experience and proven reputations.
• Look for a good listener, someone who understands what you want.
• Ask if they are a member of the Board of Realtors and continuing their education.

Ask the agent for a few referrals. When talking to a referral ask:

• What they were like to deal with?
• How hard did they work for you?
• Do you feel they were honest?
• Did they get you a good price?
• Were there complications?
• Do you feel they looked out for your best interest?
• Would you use them again?

Good questions to ask an agent include:

• Can I have names of referrals?
• Are you using technology to help with selling a home?
• What is your commission?
• Do you have listings to consider?
• Do you have information on FSBO properties?
• How will you help me save money?
• How will you protect my interest?
• Why should I use you over another agent?

Lastly, after the interview consider the following before making a final decision. How fast did they return your call? Which agent asked questions to determine your needs and wants? Which one asked about what you can afford and if you have lending in order? Which seemed most knowledgeable about the community and which did you feel most comfortable with?

Are Schools important to you

One of the top search features for a home is the school system but if you are not from Birmingham or its surrounding areas then it can be hard to know what school systems to put your kids in. This is where a great agent who’s familiar with the area and your needs can be a wonderful asset. If you are new to Alabama, specifically Birmingham, Jefferson County or Shelby County - we’ve put together informatin below to help you find a school system in Birmingham, Alabama and its suburbs that is a good fit for your family.

Preferred K-12 Schools Systems in Birmingham, Alabama and its Suburbs

Mountain Brook City Schools http://www.mtnbrook.k12.al.us/
Homewood City Schools http://www.homewood.k12.al.us/
Hoover City Schools http://www.hoovercityschools.net/
Vestavia City Schools http://www.vestavia.k12.al.us/index.cfm
Trussville City Schools https://www.trussvillecityschools.com/Pages/Default.aspx
Shelby County Schools http://www.shelbyed.k12.al.us/

List of Top 100 High Schools in Alabama
http://www.usnews.com/education/best-high-schools/alabama/rankings?int=c0b4c1

Great Elementary Schools in Birmingham, Alabama and it’s Suburbs
Mountain Brook City Schools http://www.mtnbrook.k12.al.us/
Homewood City Schools http://www.homewood.k12.al.us/
Hoover City Schools http://www.hoovercityschools.net/
Vestavia City Schools http://www.vestavia.k12.al.us/index.cfm
Trussville City Schools https://www.trussvillecityschools.com/Pages/Default.aspx
Shelby County Schools http://www.shelbyed.k12.al.us/

List of Schools in the Birmingham Area graded by test scores and number students enrolled
http://www.homefacts.com/schools/Alabama/Jefferson-County/Birmingham.html

Finding the perfect home

You are now pre-qualified or pre-approved to find the home of your dreams and have a real-estate agent to guide you on your journey. A good agent will provide you with as many homes as you care to see.

Do you know what kind of home you are looking for, what neighborhood you want to live in, what schools you want your children to attend? Is shopping important or are you looking for a home near water? Would a condo or townhome or even a pre-fabricated home fit your needs? All these questions along with questions regarding features and amenities will be among the things your real estate agent will ask. An agent is going to be much more successful if they know these requirements. Help them with this process by making three lists. A needs list, likes list and a dislikes list. Factor in your future plans/goals such as more children, less children, parents moving in, etc.

A needs list should including: number of beds/baths, bath in master, separate dining room, garage, fence, certain school district, etc.

A dislikes list or Do not want list should include things like: tiny yard, too many baths, small closets, basement etc.

Your likes list or want/dream list should have all the features you would love to have in your home and may include: fireplace, large kitchen, green house, etc.

When considering a home think about the surrounding houses and how they are kept, explore the lot of the home you are considering thoroughly, spend time in the area visit local shops, parks, theatres. Check local crime rate and consider how the local traffic is and how it will affect your commute. Research if the area has flood issues when it rains and how fast water drains from the yard, does it drain away from the house.

Whatever you do be sure you ask lots of questions, this is potentially the largest purchase you’ll ever make. Be sure you are satisfied you are making an informed decision. Before a final deal is reached consider having a home inspection done, your agent can help you locate a professional home inspector. A home inspection includes a report provided to you but consider having the inspection scheduled when you can be in attendance so the home inspector can show you any issues and talk you through what it will take to fix them.

Closing the deal

Once you and your real estate agent discuss and come to an agreement on an offer to present, put it in writing. Don’t reveal your strategy and don’t make oral offers. With your real estate agents assistance offer the seller a written contract setting out the commitments and promises that you and the seller will agree on in order to make the sale. A well-drawn contract should protect all parties. It should include: the offering price, down payment, legal description of the property, method of conveying the title, fees to be paid and who will pay them, amount of a deposit, conditions under which the seller and buyer can void the contract, the settlement date, financing arrangements, a list of appliances, furnishings and personal property that are being sold with the home.

Once a contract has been written and accepted you are almost to the end of your journey. Now you will need to close the deal.

What is involved in a real estate closing?

The road to closing is short with only a few stops. Generally all steps are handled by the title and closing agency laid out in your contract. We at South Oak Title hope that upon writing an offer you convey to your agent that you want to request for us to be used as the title and closing agent.

At closing, You will be there along with (in most cases) someone from your lender and an attorney who is acting as the closing agent.

The closing agent’s job is to make sure that all necessary documents are signed and verified and that the money from the sale and/or refinance of the property is properly disbursed.

Other people can and may be present at the closing including your own attorney, the real estate agents involved in the sale and possibly even the seller.

Once you’ve closed on your home you will be on the last leg of your journey, moving in! Congratulations, you’ve reached your destination and navigated the process of buying a home and made becoming a home owner a reality.