THE HOME BUYING PROCESS
Step 1: Finding A Real Estate Agent
Working with a buyers agent will ensure that you are provided with the best services and resources throughout the home buying process. In addition to being your local expert on neighborhoods and market conditions, your agent will also be able to recommend top loan officers, contractors, and inspectors - coordinating and guiding you through each step of the home buying process. When you find the right house, your agent will also work with you to craft a competitive offer and will advocate for your during negotiations with the seller and listing agent.
Step 2: Finding A Lender And Getting Pre-Approved
Unless you are an all-cash buyer, you will need to work with a mortgage lender to get pre-approved for a home loan. Your agent will be able to provide you with a list of trusted local lenders for you to reach out to. You should speak with at least three lenders before choosing one to work with - they will be your financial resource for your purchase, so ask lots of questions and make sure you receive answers that satisfy you. Once you decide which lender to work with you can move forward with the pre-approval process. Getting pre-approved is a simple process, there is no application fee and your loan officer will simply need to review your credit score, income, and assets. A copy of your pre-approval letter will be included with all offers that you make to purchase. Once you have a ratified contract, additional documentation may be required to further process the loan. Remember, you don't always have to put down 20 percent as your parents once did. There are loans available with little to no down payment. An experienced home loan expert can help you understand all your loan options, closing costs and other fees.
Step 3: Figuring Out What You Can Afford
Just because you are approved up to a certain price point, that does not mean you should plan to take out the maximum loan amount. Be sure to evaluate your existing monthly expenditures to better understand your available budget. You can do this by making a list of monthly expenses excluding your current rent or mortgage. Subtract that from monthly deposits and you will be left with your budget for housing expenses - including mortgage, taxes, insurance and maintenance. When examining your finances you should also consider the need for a down payment, closing costs, fees (such as fees for an attorney, appraisal, inspection, etc.) and the costs of any remodeling or furniture.
Step 4: Searching For The Right Home
Now that you are pre-approved it is time to start searching. Make a list of all of the features you desire in your new home. Some items to consider when making your list include: Type of property (attached or detached? Condo? Townhome?), number of bedrooms and bathrooms, number of stories, square footage, garage or driveway, and size of yard. You will also need to consider location. Do you want to live in a particular type of neighborhood or in a specific school zone? Is your daily commute or proximity to restaurants and shopping a consideration?
Step 5: Making An Offer On A Home
Once you’ve found the home you want it’s time to make an offer. Your agent will be able to take a look at recent sales (comps) in the area to give you a better understanding of the asking price and advise you regarding the other terms of the contract. Your offer will include a copy of your pre-approval letter as well as an Earnest Money Deposit (to be paid at ratification). Once you’ve made your offer the seller can either reject, accept (ratify) or counter with a change in terms. If you receive a counter, the ball is back in your court and you will have the opportunity to also reject, accept (ratify) or counter. While there is no inherent contractual time limit during this negotiation process, you do not want to go back and forth too much and typically both parties end up meeting somewhere in the middle.
Step 6: Scheduling And Conducting Inspections
While you can request any number of inspections as part of your home purchase, there are four inspections called for in just about every contract - Termite and Moisture Inspection, Home Inspection, Appraisal, and The Final Walk Through.
Termite And Moisture Inspection: Lenders require a recent report from a termite and moisture inspector to confirm that the property is free of wood-destroying inspects, moisture damage, or conditions which might lead to such damage. Any issues noted in the inspection that need to be remediated are generally the responsibility of the seller and must be completed prior to closing.
Home Inspection: Most real estate contracts include a home inspection. During a Home Inspection, your Inspector will test all systems as well as conduct a visual inspection in every space that can be reasonably accessed inside and outside of the house. After the inspection is completed you will receive a report for your review. After reviewing the Inspection Report you will have the option to: 1) request/ negotiate repairs with the seller, 2)move forward without requesting repairs, or 3) walk away from the transaction.
Appraisal: An appraisal is required by the lender to validate the agreed upon purchase price. In some instances, an appraiser may require repairs, which are generally the responsibility of the seller. If the appraised value of the home is below the agreed upon purchase price, the buyer is not obligated to complete the purchase and the buyer and seller may negotiate different terms to complete the sale.
Final Walk Through: This final inspection is conducted a day or two prior to closing. This inspection is conducted by the buyer and is an opportunity for you to confirm that the property is in substantially the same condition as when you made your offer, any agree-upon repairs have been completed, the property is free of trash and personal items, and that all systems are in working order.
Step 5: Closing Day
Time to make it official! On your agreed upon closing date you will meet at your Closing Agents office to review all paperwork, have any final questions answered, sign the final documents, and walk out a homeowner!
Getting Pre-Approved
As a buyer, including a pre-approval letter with your offer is a necessity if you want to be competitive, and have sellers take you seriously.
This video explains both the importance of a mortgage pre-approval as well as what you can expect in the process.