The process of buying a house can be extremely emotional, stressful, and time-consuming. Several factors outside of one’s control can make the process longer and more expensive like personal finances, market conditions and the local and national economies can affect how long the process can be and how much you’ll spend.
Buying a Home in Alabama
Alabama is a great place to live and the Birmingham metro consistently makes the list of one of the most affordable places to live. From mountains to coastline, big cities, and small towns, there are a lot of decisions to make when moving to Alabama. Keep reading to learn about Alabama’s current real estate trends to better prepare yourself for the journey ahead.
Before You Start House Hunting…
It’s easy to get wrapped up in the excitement of buying a house in Alabama, but there are several steps to take before driving around your favorite neighborhoods. Following these steps will ensure that you’re ready to act when the right home becomes available and have one of the strongest offers on the table.
- Save for a down payment
- Get pre-approved for a mortgage with a reputable lender
- Choose your city (this one may be the hardest!)
- Find a real estate rockstar
- View homes for sale
- Write an offer
- Have an inspection and appraisal
- Do a final walkthrough and head to closing!
It’s that easy! Or at least on paper, it’s easy. In the following sections, we’ll break down each step with clear action items to make your move to Alabama as smooth as possible.
Saving for a Down Payment
As a general rule of thumb, you’ll want to have 20% of the home’s price saved for a down payment. Certain types of loans may require more or less than 20%. On average in Alabama, you’ll need about $38,000- $40,000 for a down payment, as the average price of a home is about $194,300.
If you or your spouse are veterans, VA loans are a great option for home buying and allow you to contribute 0% and do not come with some penalties that other loans carry for paying less than 20%. An FHA loan requires a minimum of 3.5% down, but keep in mind this figure may vary by lender, and not all properties are approved for an FHA loan.
Get Pre-Approved for a Mortgage with a Reputable Lender
A loan officer will help you navigate the waters of applying for a loan and discuss which option is best for your situation. They will consider your full financial profile including debt-to-income ratios and determine how much you can borrow to purchase a home. A good figure to keep in mind is 36%- your debt-to-income ratio must be less than 36%, including the debts incurred by your future home purchase.
This is why it’s important not to make any big purchases, or co-sign for any big purchases during your home-buying process. Those debts could raise your debt-to-income ratio and make you ineligible for a mortgage on your dream home. Also, be sure to make your credit card payments and other monthly payments regularly and on schedule during this time.
Another important number to remember is 28%. Most lenders want your monthly housing costs to be less than 28% of your monthly income. Once approved for a specific figure, the lender will issue a pre-approval letter. This letter is an important tool and will come in handy when writing offers.
Choosing the Right Location
This may be the hardest step in the whole process! Alabama is filled with great homes, neighborhoods, schools, restaurants, and more. Whether it’s Cahaba Heights, Tuscaloosa, or Birmingham you’re looking to move to, there’s sure to be something to fit your budget and needs. As previously mentioned, the average home price in Alabama is about $194,300. But this number varies dramatically from city to city and even street to street.
When searching for your home, take a look at past home trends and homes that have recently sold in the area. This can give you an idea of what your home’s value could be in a few years. You want to make the right choice now and the one that offers a great return in the future.
Find a Real Estate Rockstar
The right agent is a major key factor in the home-buying process. You’ll want someone knowledgeable of the area, someone who is a great communicator, and someone who will act as your biggest advocate in this process.
A good agent will do more than help you find a great home, they can help recommend title companies, real estate attorneys, and even contractors like plumbers and electricians. Finding the right people to help throughout the process will help make a house a home.
View Homes for Sale
Now the fun really starts! You and your agent will work together to view homes in your price range. One of the first things you’ll need to do is create a “needs vs wants” list. Which of your priorities are non-negotiable? Which would be “nice to have”? Your agent can also help you prioritize the needs and wants based on your price range and preferred neighborhoods. Historically in Alabama, May through August tend to be the “hottest” months for real estate. Starting your search at this time of the year may lead to more inventory available.
Write an Offer
Congratulations! You found a house you’d like to call home. You and your agent will work together to write a strong offer to present to the sellers. You’ll want to work quickly and make the deal as sweet as possible with factors like few contingencies to ensure your offer is accepted.
In your offer, be sure to include inspection contingencies and any repair credits you’d like to ask for. Inspection contingencies offer you the opportunity to change your offer or even back out completely if the inspection finds major problems. Asking for repair credits instead of a repair can move the contract along while you, the buyer, get to make the repairs in the future choosing your own contractors, colors, and materials. These contingencies might make your offer weaker than others on the table, so be sure to discuss them with your agent and how they may affect the contract.
Have an Inspection and Appraisal
Congratulations! Your offer was accepted. Next, you’ll want to have an inspection to look for major flaws and get an idea of the overall condition of the home. Your inspector will look at the biggest pieces that keep your home safe and comfortable like the roof, HVAC system, electrical wiring, and plumbing.
An appraisal will make sure the home is worth the price you’re paying. If the appraisal comes back lower than the agreed-upon price, you’ll need to re-negotiate or add more to the down payment.
The Final Walkthrough and Closing!
Right before you sign the paperwork, it’s a good idea to have a final walkthrough of the property and ensure any agreed-upon repairs were completed and that the home is in good condition.
At closing, you’ll meet with the title company and a real estate attorney to finalize and complete the title transfer. Your agent and the attorney can provide full details of the paperwork and documents you’ll be signing. Closing costs will also be due at this time. Expect to pay about 3-5% of the home’s price. Closing costs include lender fees, prepaid costs, title and escrow charges, and other fees like home warranties or inspection fees.
Heights Title- Your Partner in the Home-Buying Process
The team at Heights Title has several years of experience in the real estate industry and a wide array of resources available to help make the purchase of your home as smooth as possible. Whether you are a buyer, seller, agent, builder, or lender, as your closing provider it is our goal to deliver remarkable service. Contact us today at 205-352-2344 or visit us online.