This is an exciting time in your life! Purchasing a new home whether your first, an investment property or your dream home – is a process that requires expertise! Working with a real estate agent can help you navigate the system and help you get the best deal with the least amount of stress possible. Below is a summary of the buying process – if you are a first time buyer, it is important to understand what will happen on this exciting home buying journey.
Why Do You Want To Buy?
As a realtor it is important for me to understand why you are looking to buy a home. If I know why you are buying it will help me find the perfect home for you faster! Are you looking for your first home because you no longer want to pay rent? Are you looking for an investment property to grow your portfolio? Whatever the reason, I can help you if I have clear vision of your wants!
Real estate is the biggest investment you will make! Before you can jump in and start looking at homes or investment properties it is important to know your financial status. Understanding your monetary value can make the process go faster and give you a more accurate scenario of the options available to you.
Below are some steps to take before you begin your home search!
Organize Your Paperwork.
Having your paperwork in order will expedite your search with the agent you work with. It can put you in a better position for making a deal and helps the whole process go much more smoothly. The typical paperwork you want to have on hand for your home buying process includes:
- Bank accounts & statements
- Credit cards
- Auto loans
- Recent pay stubs
- Tax returns for two years
- Copies of leases for investment properties
- 401K statements, life insurance, stocks, bonds, and mutual account information.
Check Your Credit Rating.
If you do not know your credit score – this is a must! Your credit score has a direct relation to the type of property you can get and if you can get a loan – as well as the rates you qualify for. While your lender will check your credit rating when you apply for a mortgage – it would be better to do it yourself before you apply so you can take care of any issues before you begin the home buying process.
At this phase I would also recommend not making any major changes to your finances! Do not go out and buy lots of furniture or run up a lot of credit card debt – or even make a job change. All of these can affect your credit rating and how the lender sees you!
Home Buying Search
Now that you know your credit rating and have an idea of how much you can afford, it is time to start your search! Think about things that are important to you in terms of location! Do you need great schools? Are you a beach lover or a country gal? You need to list all the things that are important to you in terms of location before you start on your search then you can do the below to help you refine your areas!
Take a Drive.
Once you know have a general idea of the type of areas you would like your home to be in – it is time to go for a drive. Visit different neighborhoods and areas to get a feel for the areas! While you can do some online research, nothing can replace the actual visit to an area to get the “vibe” and see if it is a fit for you.
Narrow Your Search.
Now that you have an idea of areas you can work with your agent to begin touring houses!
When You Find The Perfect Home.
That moment when you walk into a home and go “this is it” is an exciting one! At this point you will let your agent know you are interested and then they will guide you to putting in a fair offer.
Inspections & Appraisal
The Initial Agreement and Deposit.
An effective agreement is a legal arrangement between a potential purchaser and the property’s seller.
Some important tips to keep in mind to streamline the process:
- Keep written records of everything. For the sake of clarity, it will be extremely useful to transcribe all verbal agreements including counter-offers and addendums and to convert them into written agreements to be signed by both parties. We will assist you in drafting all the paperwork for your purchase and make sure that you have copies of everything.
- Stick to the schedule. Now that you have chosen your offer, you and the seller will be given a timeline to mark every stage in the process of closing the real estate contract. Meeting the requirements on time ensures a smoother flow of negotiations so that each party involved is not in breach of their agreements. During the process we will keep you constantly updated, so you will always be prepared for the next step.
The Closing Agent.
Either a title company or an attorney will be selected as a closing agent. The closing agent will hold the deposit in escrow and will research the complete recorded history of the property to ensure that the title is free and clear of encumbrances by the date of closing and that all new encumbrances are properly added to the title. Some properties are subject to restrictions which limit various activities such as building or parking restrictions. There may be recorded easements and encroachments, which limit the rights to use your property.
How to Hold Title.
You may wish to consult an attorney or tax advisor on the best way to hold title. Different methods of holding title have different legal, estate and tax implications, especially when selling or upon death of the title holder.
Once your offer is accepted by the seller, you will need to have a licensed property inspector inspect the property within the time frame that was agreed upon in the effective contract to purchase. You may elect to have different inspectors inspect the property, if you wish to obtain professional opinions from inspectors who specialize in a specific area (eg. roof, HVAC, structure). If you are purchasing a commercial property, then you will need to have an environmental audit done on the site for the lending institution. We can recommend several different inspectors.
Depending on the outcome of these inspections, one of two things may happen:
1. Either each milestone is successfully closed and the contingencies will be removed, bringing you one step closer to the close, or
2. The buyer, after reviewing the property and the papers, requests a renegotiation of the terms of contract (usually the price).
Appraisal and Lending.
It is imperative that you keep in close communication with your lender, who will let you know when additional documents are needed to approve your loan application and fund your loan. If the agreement is conditional upon financing, then the property will be appraised by a licensed appraiser to determine the value for the lending institution, via a third party. This is done so that the lending institution can confirm their investment in your property is accurate. Appraisers are specialists in determining the value of properties, based on a combination of square footage measurements, building costs, recent sales of comparable properties, operating income, etc. When you are within two weeks of closing, double check with your lender to be sure the loan will go through smoothly and on time.
If the property that you are purchasing is conditional upon an association approval, request the rules, regulations, and other important documents from the seller as soon as you have an effective agreement to purchase. Make sure that the application documents and processing fees are submitted to the appropriate person at the association by the required time. Fill out all of the information completely and legibly so there is no delay in processing the application. If you are required to meet with the association for your approval, make an appointment as soon as possible for the interview. Most associations require a certificate of approval before move-in. Your closing agent will request that the original copy of this approval letter be brought to the closing, so that it can be recorded with the deed in the county public records.
If you are obtaining a loan, you will be required by your lender to purchase a certain amount of insurance on the property. The value will depend on the lending institution and the purchase price of the property. You may be able to save hundreds of dollars a year on homeowners insurance by shopping around for insurance. You can also save money with these tips.
- Consider a higher deductible. Increasing your deductible by just a few hundred dollars can make a big difference in your premium.
- Ask your insurance agent about discounts. You may be able get a lower premium if your home has safety features such as dead-bolt locks, smoke detectors, an alarm system, storm shutters or fire-retardant roofing materials. Persons over 55 years of age or long-term customers may also be offered discounts.
- Insure your house NOT the land under it. After a disaster, the land is still there. If you do not subtract the value of the land when deciding how much homeowner’s insurance to buy, you will pay more than you should.
You are almost there! The dream home you have been searching for is almost yours – but as a home buyer there are still a few more details you need to take care of before you sign on the dotted line.
This is usually completed the day of – or before your closing date and allows you to do one final review of the home to ensure it is in the same condition you expected it to be upon delivery. It is a time for you to make sure anything stated in your contract was left – or removed and that no damage happened since the last visit.
As your buyer agent I will help provide you a complete list of all the local phone numbers you will need to get your utilities up and running including electric, cable etc.
Bumps In The Road.
It does not happen often, but sometimes things happen that cannot be predicted – but rest assured I will be there to help you 100%! Whether you found new home damage during your final inspection or something is no longer working – I will make sure they are dealt with in a way that makes you happy!
The big moment! Let’s go sign for your new house. You will arrive at the location agreed upon and the following will happen:
- All parties will receive a settlement statement showing all the financial transactions that took place during the purchase process.
- All parties will sign this statement including the closing agent.
- Any financing documents will be signed at this time from your lender.
- Funds for final payment due can be done with a wire transfer or certified bank check.
- Seller will arrange to have property keys and any other required information available to you at closing.