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Buying Your Home in 10 Easy Steps

This list is designed specifically for homebuyers.

It is a simple set of guidelines that highlights the ten most important steps in purchasing a home.

Of course, every transaction is different, but in general most follow this order:

 

1. Find a lender

So many first time homebuyers don’t understand the importance of this step. You know how much you can afford in a mortgage each month. You’ve told your agent. Why aren’t they listening???? Well, the answer is simple: no matter what we think we can pay each month, it unfortunately doesn’t mean squat without the bank’s approval. Many sellers ask for a pre-approval letter when you make an offer. Think about it like this: If you were selling your car to a total stranger who sent you an email saying, “I’ll pay full price! No problem!” then showed up hoping for the keys without any immediate cash, you’d say “No way!” right? The same is true for someone who’ll eventually be selling you a home. Whether it’s a brand new place or one that’s had a little love, the entity responsible for the sale of that home needs to know that if they accept your offer, it won’t be held up by financing. So find a lender you trust, and get a pre-approval letter. It will only take a few minutes of your time, and you’ll be better informed about what you can offer when the perfect place comes along.


2. Decide on what's important

Before you start shopping for that dream home, decide what it’s got. Remember: According to national data, most people stay in their first home for 5-7 years. So imagine where you might be a few years down the road. If you’re single and loving it, you might not be down the line. Does the home you’re considering include room for a partner? And what about kids? If you’re planning on expanding your family in the future, make sure you have room to accommodate that plan, but don’t get hung up on things that don’t yet exist. If you were to have five kids tomorrow, chances are, you’ll be looking for a new place long before they all need their own parking space, so be realistic! Don’t shop at the tippy top of your budget. You’ll end up what we in the business call “house poor.” WOW! Your home is gorgeous! When does the furniture arrive? Don’t you believe in using the a/c? These are not questions you want to hear as you lower your boss onto the egg crate you’ve got set up for a “sofa” in your new 5000000 sq ft dream home that you just HAD to have. Figure out what’s really important to you in a home and leave the extras as just that—extras!

 

3. Shop!

This is the fun part! It’s great dreaming about a home of your own; now make it a reality. Work with an agent to find something that’s in your budget and fits as many of your desires from your list of what’s important as possible. I always begin by creating my clients an on-line search engine that delivers properties that meet their minimum criteria to them via email. It allows you to peruse listings at your leisure and decide if there are things that you really like or dislike that may not have occurred to you in making your initial list. Once you’ve chosen ten or more listings that interest you, I’ll pick you up for a day of inside showings. Take pictures, make notes, and at the end of each shopping session, put the homes in order from best to worst. It will help you narrow your choices when the time comes.
 

4. Make an offer…..eeek!

This is the part that worries so many people. But, in actuality, it’s not as scary as you might think. Making an offer should be something you do after some research on the home and its surrounding area. Your agent can help you identify other homes that are similar in nature to the home you’ve chosen, which can help you determine a fair market value for the home you’re making an offer on. The offer comes with a few steps: 1. A local sales contract that must specify the property location, the amount you’re willing to pay for the property, any concessions you’d like to see made on your behalf, and any additional addenda that may alter or be attached to that local contract. 2. If necessary, you may need an FHA Disclosure sheet. This is only applicable for purchasers who are using FHA financing and must be attached to the contract. 3. An inspection addendum that states you’ll be inspecting the home for major defects using an inspector of your choosing (highly recommended!). 4. (Often) Earnest money. This is a check given by the purchasers to the sellers to show their intentions to purchase the property in earnest should the sellers accept the offer. It can be of varying amounts and may be a requirement for some properties. 5. (Often) Pre-approval letter. We’ve already talked about this one, so you know why it’s important.


5. Negotiations.

Once an offer has been delivered from the purchaser’s agent to the seller’s agent, the contract enters into a period of negotiations. For each offer that is written, the recipient of that offer has three options: a. accept the offer as is, b. decline the offer altogether, c. write a counter offer. These negotiations continue until everyone is satisfied with the terms and conditions of the contract. Once all parties have agreed on the contract, it becomes “executable.”


6. Inspection time!

After your offer has been negotiated and accepted, it’s important to have the home inspected. A licensed home inspector will check the home for major defects from the ground up. This inspector should be someone you feel comfortable with. Your agent may have some suggestions for frequently used home inspectors, but remember, it’s your inspection and your choice. A home inspection is an out of pocket expense and typically comes with a fee between $300-$500, depending on the size and style of the home. After the inspection, you will receive a report detailing any major defects found. IF there are any defects found in the inspection, you can request that the seller make repairs. These repairs do not have to be made, but if the nature of the repairs is such that you feel unsure about the purchase of the property or they are something your lender requires repaired, it gives the purchaser the opportunity to ask for a release from the contract. The repairs request is an additional contract and can lead to a series of negotiations if the seller does not agree that all of the requested repairs are necessary or address major defects.

 

7. Apply for your home loan.

WHAT? I already have a lender. I know, I know. But making a formal application for your home loan is different. Within 5 business days of having your offer accepted and your inspection completed (within one work week), you need to make a formal application for your home loan. Your lender will likely need to gather some important financial information from you, like bank statements, tax returns, and recent pay stubs. Once application for the loan has been made, it’s sent to your lender’s underwriter. Underwriting a loan can take time, so the next step in buying a home is the longest one.


8. WAIT.

From the time the original contract is accepted until the time you close on your new home, the process generally takes about a month. But that doesn’t mean it can’t be a shorter (or longer) period of time. While you’re waiting, your lender and closing attorney are making sure your loan is in good order and that the title of the home is clear. Similar to the title on a car, checking for a clear title on a home means that the closing attorney is making sure no one else has a claim to the house. They need to make sure the deed can pass easily to your name without anyone coming back at a later date for their invitation to the Thanksgiving feast!


9. Secure your homeowners’ insurance and have your new home inspected for termites.

You may already have an insurance company with whom you feel safe and secure. Great. Often, agencies offer discounts to bundled policies, so check with your car insurance carrier first. You will need to insure the property, the house, and the stuff you’ll keep inside. This is required for your lender and they will assist you in finding a policy that fits your needs. This can be done within the last week before closing. Another final task for this week is to have the home inspected for termites. This is an additional out of pocket cost and averages about $125. The termite inspector will search for both active and old termite colonies and will provide your lender and closing attorney with their findings. Any active termites or wood eating fungi must be remedied by the seller and taken care of before closing.


10. Closing Day!

Just before closing, we’ll do what’s called a “final walk-through.” This is the time we check to see that all requested repairs have been made and that the home is in the order of your expectations for purchase. When the closing day arrives, you’ll meet at the appointed attorney’s office to sign the closing paperwork. I hope you’ve been stretching out those fingers, because you’ll be signing your name about a million times. Each closing appointment is different, but they are all designed with the same end in mind: someone leaves with a new house. Depending on your closing statement, you may have to bring a certified check with you to the closing appointment. This will be determined long before the closing date and you will receive instructions on exactly how the funds will be handled. At other times, you may receive funds that were overages credited to you in the sale of the home. Either way, it is important that you show up with two forms of legal identification (like a drivers license and social security card), be on time, and be ready to start your new adventure in home ownership! After the closing date, your only duty will be to claim what is called your homestead exemption for the purposes of property taxes. This will require you to take your deed (which will be received by mail) to the county courthouse and present it to the tax assessor. This is an important final step as it will insure that your taxes stay at the discounted rate given to owners and occupants of homes that are their primary residences.

That’s it! It’s not at all as scary as it seems. Take your time, follow the steps, and always ask your agent for assistance or explanations if you get nervous about anything at all. They may not be able to answer your question, but chances are, they’ll be able to direct you to someone who can. Good luck in your newest journey – the road to homeownership!



 
 
 
 

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