Buying a home is one of the biggest investments and financial decisions you can make. While it is a major commitment and responsibility, it is also a very exciting time in your life. I’m proud that I will get to play a part
in it and am excited about soon having the privilege of handing you the keys to your new home!
With that said, it’s important to keep in mind that home buying is a complicated process. I will be working hard to make sure that everything is as rewarding as possible, guiding you at every step and making sure that
your needs and desires are met. This guide was designed to inform you about all steps of the home buying process so that you can feel confident, make informed decisions and act as an educated buyer. It will also help both me and you
understand the things that you’re looking for in a home so that our search can be made as easy as possible.
Talk to a qualified lender
After looking at this information for yourself, it’s time to speak to a qualified lender. A professional advisor will not only be able to give you information on the best rates and terms available in the current market, but he or she can also explain to you what options you have given your unique financial situation. There are a considerable number of choices available to consumers and I advise you to learn as much as you can about the different lending options that are available to you.
Talking to a lender at this time will help you get a more accurate idea of what you can afford.
Lender Interview Cheat Sheet
- What kind of loans do you offer?
- What kind of loan would you recommend for me? What are the advantages and disadvantages of this loan structure?
- What is the current interest rate? Is the rate quoted the lowest for that day or week?
- What is the Annual Percentage Rate (APR) of an offered loan?
- Is the loan rate adjustable or fixed?
- What are the discount points and origination fees?
- What are all the costs of the offered mortgages?
- If the rate is adjustable – how will rate and loan payment vary?
- What are the qualifying guidelines for this loan?
- What is the lender’s required down payment for this loan?
- What documents will need to be provided?
- What are the closing costs?
- Will the lender guarantee the GFE (Good Faith Estimate) of settlement charges and loan terms?
- Does the lender offer a loan rate lock? Is there a fee for the rate lock?
- Is there a prepayment penalty?
- Are you equipped to approve loans in-house?
- How much time do you need to fund the loan?
- Will mortgage insurance be required?
- Can the term of the loan be extended?
- Is there a cap on payment adjustments?
Pre-approved buyers are ahead in the home buying game. If you make an offer on a home and then apply for a loan instead of the other way around, you are at the mercy of the lender who now knows that you don’t have time to shop around. A pre-approval letter from a lender will also give you an edge when multiple offers have been made on a house. Pre-approved buyers generally close escrow more quickly, since most of the paperwork has already been taken care of.
Home shopping can be both exciting and exhausting but doing some preparation before you hit the street to look at homes will help out tremendously.
It’s time to get out and see some of the houses you’ve been looking at in person. We will compile a list of the properties you’ve found as well as options I’ve found of similar properties on the local Multiple Listing Service (MLS)
1 We don’t want to view too many properties in one day.
2 Don’t be put off by interior decorations – they can and will be changed.
3 Bring a notebook, pen and / or digital camera with you as you search.
4 Keep a folder with flyers or print-outs on properties that you’ve viewed.
5 Don’t hesitate to ask questions.
Making an Offer
When you’ve found a home that you’re interested in, it’s time to make an offer. As your buyer agent, I will draw up a contract with your offering price and necessary contingencies into a formal contract.
You will want to review this document carefully and make sure it states your terms exactly. If the offer is accepted by a seller, this contract will become a legally binding agreement.
In addition to an offer contract, you may need to provide a deposit as well as a letter from your lender indicating your qualification to purchase. A deposit typically equals roughly 1% – 3% of the property purchase price. You will not be at risk of
losing your deposit money as long as you do not default on your contract. The amount will be credited towards the purchase price of the house at closing.
After you’ve made your offer, the seller will be able to:
- Accept your offer
- Reject your offer
- Execute a counter offer
In most cases, a seller will not accept your initial offer outright. Typical counter offers include modifications to:
- Purchase price
- Closing date
- Possession date
When you make an offer on a house, you should be prepared for the negotiations to go back and forth several times before both parties agree to the terms. You might also have to compete with other interested buyers in
certain market conditions. When an agreement is reached on all issues, and both the seller and you as the buyer have signed the offer, you are both under a legally binding contract.
Your offer is accepted. Now it’s time to get to work. Before we can close on the purchase of your new home, we need to take a few more steps to make sure the purchase is a sound decision.
Step 1: Home Inspection / Property Survey
As the buyer, you have the opportunity to hire a professional inspector to evaluate the condition of the home. An inspection clause is included in the written contract given to the seller. The goal of a home inspection is to give you an objective, independent and comprehensive analysis of the physical condition of your potential new home and check for any safety issues that might otherwise be unknowable. A professional inspector will check on the structure, construction and mechanical systems of the house. This usually includes checking these areas:
- Radon gas
- Water source and quality
- Lead paint
- Electrical systems
- Plumbing and waste disposal
- Water Heater
- HVAC System
You will receive a written report of the inspection and an estimate of the cost of any and all repairs. If you choose to be present during the inspection, you can ask your inspector about unique features of the property and get his or her opinion on the necessary maintenance for different areas of the property. Depending on the results of the inspection, you will have the opportunity to:
- Get out of the written offer if major problems are discovered
- Renegotiate the purchases price to account for necessary repairs
- Negotiate that repairs are made by the seller before final purchase of the property
Your lender may also require that a legal land survey be completed of any property on which they issue a mortgage so that they can obtain a clear lender’s title insurance policy.
A surveyor will determine:
- Whether the house is within the property borders
- Whether there are any encroachments on the properties by neighbors
- The extent to which any easements on the property may affect legal title
Step 2: Clearing the Home Title
Simply explained, “title” is the right to own, possess, use, control and dispose of property. When you buy a home, you are actually buying the seller’s title to the home. A deed is the written legal evidence that the seller has conveyed his or her ownership rights to you. Before the closing meeting when the actual transfer of ownership occurs, an attorney or title specialist generally conducts a title examination. The purpose of the title examination is to discover any problems that might prevent you from getting clear title to the home. Generally, title problems can be cleared up before settlement. But in some cases, severe title problems can delay settlement, or even cause you to consider voiding your contract with the seller. Some “clouds on title” can be corrected relatively easily while others can become quite complicated to remove. You should insist on being kept informed of every step in the title examination process. If title problems are uncovered, it is important for you to understand your legal rights.
What is Title Insurance?
Title insurance is the best way to protect yourself against title defects that have occurred in the past, which may not appear until after you’ve taken ownership of the property. Before a title insurance policy is issued, a title report is prepared based on a search of the public records. This report gives a description of the property, along with any title defects, liens, or encumbrances discovered in the course of the title search. It is different than casualty insurance in that you pay a onetime fee and it protects against past (as opposed to future) events. Title insurance will protect you against title defects that were not discovered in the course of the title search. If such a defect were discovered later, your title insurance would cover you. If title problems are severe enough and not covered by insurance, you could actually lose your house. A title insurance policy protects you and your heirs against title defects for as long as you own your home.
Step 3: Getting an Appraisal
Once you have determined that there are no defects on title and all inspection concerns have been
resolved, it is time to order an appraisal. An appraisal is an estimate of the value of a property made by a qualified professional. The appraisal of your prospective home is as important as your credit history in obtaining a mortgage. After all, the property you are purchasing serves as the collateral for the loan. Although the primary goal the appraisal is to justify the lender’s investment, it also protects you from overpaying. Your lender will generally hire the appraiser and will charge you as the buyer a fee for the service. If the appraisal falls short of the amount you wish to borrow you may be refused a mortgage or offered a smaller amount on the mortgage. Your offer contract will be contingent on whether the
appraisal comes in at or above the purchase price you and the seller have agreed upon.
Step 4: Closing
Once all of the purchasing steps and contingencies are cleared, it’s time for closing! Understanding the steps and terminology used for the closing procedures are key, and I am happy to help you with a quick run down of the process in our local area. There are a few things that you will need to do to prepare.
In order to ensure a smooth closing you will need to:
Obtain a homeowners insurance policy and provide this information to your lender. Review the Closing Disclosures form that your lender or closing agent will provide you no later than 3 days before closing. This document will contain a detailed description of all costs associated with the transaction, including the exact dollar amount you will need to bring to closing. Conduct a walk-through of the property prior to closing. This will give you an opportunity to see that the
condition of the house is the same as it was at the time of contract. Additionally you will be able to ensure that any repairs agreed to by the seller, based on the inspection, have been completed.