What kind of agent do you want in your corner?In this market, there are many types of agents.. What's going to be important to you is working with someone who meets Your Needs, not theirs. Whether
Everything You Need To Know About Purchasing A Home
The purchase of a new home can bring out a large mix of emotions. Excited, Scared, Happy, Sad, Nervous to just name a few. You may think you know everything there is to buying a home or you may not have a clue where to start.
I’m going to go through the steps that the average home buyer goes through when buying their first home. You may think that when you get pre-approval, you are approved for that loan. Did you know you get to do a final walk through before closing? What do you do at the final walk through?
I hope that the information provided will help you with your new home purchase. The more educated you are, the better off you will be.
You’ve decided that you want to buy a house, now what are you supposed to do? Well, the first step is to find a dedicated, reliable real estate professional to help connect you to your new home. There are several steps to take when interviewing the right person for the job. Yes, I said interview. Because you are going to interview people who are all in the same profession and decide who will meet your expectations.
As a first-time buyer, you may want to consider a dedicated buyer’s agent to represent you, since they specialize in only working with buyers, and may be more up to speed on loan programs specifically geared toward first-time buyers. That said, you certainly can work with anyone you choose to—buyer’s agent or not.
First, do you have any family members or friends who are in the business? Maybe a co-worker, neighbor or even your dentist could recommend someone. The first thing you need to know is that not all Realtors are the same and that means that not just anyone should be able to walk you through this process. There are thousands of real estate professionals out there. Take your time, interview several and find the one that fits your needs.
What qualities do you want from that individual? Caring, determined or knowledgeable, maybe? Or how about someone who is a good listener, someone who will ask the right questions to find out what it is you are truly looking for. Is this someone you just met because you wanted to see a house you’ve had your eye on for a while and it’s finally up for sale. So, you call up an agency for a viewing and that person meets you there and walks you through the house. Well, that was a need that was just met, but what else can that person offer you? These are questions you are going to have to ask yourself. Now, some questions to ask your potential Realtor would be:
How long have they been in the business?
Don’t let a final decision be determined by how long they have been in the industry. A lot of new agents have an edge over the more seasoned agents because they are more tech savvy and they know the market probably better than most. They will fight for your needs. They are the ones who may look like a kitten upon first glance and underneath there is a tiger just waiting to be let loose.
Do you specialize in working with buyers?
Have you ever had a complaint filed against you within the state or the board?
This is a good question because it could alert you to any unethical doings on the agent's behalf.
After interviewing (or getting together) with several real estate professionals you have finally found Your Realtor and you are certain they are the one who is going to make all of your dreams come true. These following things are what you can expect from your relationship with your Realtor:
It is time to sign the exclusive buyer agreement and assign them as your representative. This document just says that before you disclose any confidential information, you should understand the relationship with the real estate professional. Once this document is signed, they are 100% working for your benefit and have a fiduciary duty to you as the buyer. Fiduciary meaning, “Relationship based on trust and confidence”.
One thing that must be understood is that you are not just signing that Agent A is going to be your buyer agent, you are entering into a contract with the Broker Agent A works for. Every real estate agent must be working with a broker in order to well, work.
Why is that good for you? Well, you can be sure that the agent you are hiring has a team of professionals backing them. That they were hired by said Brokerage to represent them because they not only passed their state exam, but they have shown to them that in one way or another they possess a certain quality about them that the Brokerage wanted to stand behind.
So always research the Brokerage the agent is from for a bigger picture of who will be representing you.
They will then collect information from you, usually utilizing a Buyer’s Needs Analysis which is basically what you are looking for in a house and how you are planning on purchasing it.
How many bedrooms?
What type of structure?
Do you want or need a pool?
What type of financing will you be using?
How much is your new home going to cost?
What is the monthly payment going to be?
What area are you looking to move to?
Once all of your needs and wants are determined you are ready to move onto the pre-approval process.
What is pre-qualification?
Getting pre-qualified is the initial step in the mortgage process, and it's generally fairly simple. You supply a bank or lender with your overall financial picture, including your debt, income and assets. After evaluating this information, a lender can give you an idea of the mortgage amount for which you will qualify.
The initial pre-qualification step allows you to discuss any goals or needs you may have regarding your mortgage with your lender. At this point, a lender can explain your various mortgage options and recommend the type that might be best suited to your situation.
Because it's a quick procedure – and based only on the information you provide to the lender – your pre-qualified amount is not a sure thing; it's just the amount for which you might expect to be approved. For this reason, being a pre-qualified buyer doesn't carry the same weight as being a pre-approved buyer who has been more thoroughly investigated.
What is pre-approval?
Getting pre-approved is the next step, and it tends to be much more involved. You'll complete an official mortgage application (and usually pay an application fee), then supply the lender with the necessary documentation to perform an extensive check on your financial background and current credit rating. (Typically, at this stage, you will not have found a house yet, so any reference to "property" on the application will be left blank). From this, the lender can tell you the specific mortgage amount for which you are approved. You'll also have a better idea of the interest rate you will be charged on the loan and, in some cases, you might be able to lock in a specific rate.
With pre-approval, you will receive a conditional commitment in writing for an exact loan amount, allowing you to look for a home at or below that price level. Obviously, this puts you at an advantage when dealing with a potential seller, as he or she will know you're one step closer to obtaining an actual mortgage.
The other advantage of completing both of these steps – pre- qualification and pre- approval – before you start to look for a home is that you'll know in advance how much you can afford. This way, you don't waste time with guessing or looking at properties that are beyond your means. Getting pre-approved for a mortgage also enables you to move quickly when you find the perfect place. When you make an offer, it won't be contingent on obtaining financing, which can save you valuable time. In a competitive market, this lets the seller know that your offer is serious – and could prevent you from losing the home to another potential buyer who already has financing arranged.
Once you have found the right house for you, you'll fill in the appropriate details and your pre-approval will become a complete application.
It is crucial to know the difference between pre-qualified and pre-approved, a pre-qualificaion does not mean that you are approved for a loan, unless you have it in writing with your loan/ mortgage amount and interest rate. This common mistake could cost you a home.
The final step in the process is what's called a "loan commitment," which is only issued by a bank when it has approved you, the borrower, and the house in question. This means the home should be appraised at or above the sales price. The bank may also require more information if the appraiser brings up anything he or she feels should be investigated (i.e. structural problems, accessibility issues, outstanding liens or litigation in progress). Your income and credit profile will be checked once again to ensure nothing has changed since the initial approval.
A loan commitment letter is issued only when the bank is certain it will lend, so the commitment date on your purchase contract should be closer to closing than to the date of your offer. (The seller can ask to see that letter as soon as the date has passed, so beware of anyone who tries to put an early commitment date into your contract).
Now that you know those differences and you have a budget of what you are ready and able to spend, it’s time to select what properties you want to see and get out there and see them. You are not likely to fall in love with and purchase the first house you see, so don’t get discouraged. Trust in your real estate professional and know that this all takes time. Sometimes, it’s just luck. But that is very rare, however say you have fallen in love and are ready to buy that specific house. Now what? It’s time to write your offer. What does that mean? You have to write to the sellers that you want to buy their house, but I’m here now and I want it.. but there has to be a written offer made so negotiations can begin.
So you have your pre- approval and your Realtor has connected you to the house you want to call home. Now what? It’s time to write the offer, and what does that mean?
Making a written offer...
Determine a price you want to offer. No, you don’t have to offer what the seller is asking, that’s why it’s called an offer. You are offering them, usually a fair market valuation for the house that they have listed for sale. They have the option to either accept it or reject it or Counter it.
Decide if the appliances are staying or the swing set in the back yard is going with the house. Sometimes items like these will be listed in the MLS, however there are often times it is not and if you want the appliances, you’d better make sure your original offer states that.
This is also the time to consider what you are asking from the seller. Do you need concessions to assist with closing costs?
The seller contributes this cash from his own proceeds, and the purchase price is not affected.
A concession means the seller will walk away with a little less cash at closing, and the buyer will not have to come up with as much cash at closing. This will affect the sellers net proceeds that they get from the sale of their home so make sure you are conscious of that if you are going to need concessions.
The seller accepts, counters or declines the offer.
If it’s accepted, you move on to the next step.
If the seller makes a counteroffer, you either accept it or make a new offer.
If the offer is refused, you can make a new offer or begin a new round of house hunting.
There are times when the offer will be refused and the seller will not allow a new offer to be made from that buyer. This typically happens when they seller feels that the offer that was submitted was an insult (often times when the offer is much lower than the asking price).
Once terms have been agreed upon, the next step is contacting the Mortgage company and obtaining your loan approval.
Meet with your mortgage professional and review your income, debt and credit profile. With this information, and a discussion identifying what monthly mortgage payment you would be comfortable with, your loan officer can get your pre-qualified.
With the pre-qualification complete, your loan officer will now verify credit and require supporting documentation for both your income and assets.
3. Finding YOUR Home & Making the Offer
Provide your Realtor with the specifics of what you are looking for and then enjoy the hunt! Once you find what you are looking for, you and your licensed Realtor will put together a formal contract to the Seller and provide Earnest Money.
Once you have an accepted offer on a property, it is time for an inspection.
Depending on your loan type, you may opt out of this step. However, potential homeowners have the right to have an inspector go out and inspect the property for any problems such as termite, water damage, or potential safety hazards. In some cases, you may request repairs to be made before finalizing the sale.
An inspection could cost between $300 to $450. There are several companies out there, one thing you want to ensure is that they are accredited for what they do.
An inspection could take anywhere from 2-3 hours and your Realtor will need to be present. You have the option to be there or not. It is always a good idea, because you can see any concerns first hand.
If you were requesting a repair to be made before finalizing the sale, that would be considered an addendum, something added such as a provision to a contract.
5. Title Search
The Title Company will review the ownership history of the property you are buying and search for any liens against the property. All liens must be cleared prior to any transfer of title.
A lien is a claim held by a creditor against the property of a debtor which secures the payment of a debt.
Could be from a previous home improvement that the seller did not pay on and allowed to default.
Once you are ready, an appraisal will be ordered on your property. This is ordered by the lender and the appraised value must justify the Sales Price.
This must be done by a licensed appraiser. This is something that you will pay for, just because the lender is ordering it doesn’t mean they will also be fronting the bill.
An appraisal is an estimation of value. The process of ascertaining the value of property involving an expert opinion.
7. Processing Review
A loan processor will put together all information pertinent to the loan application including the title report, appraisal, inspection if needed, income and asset documentation, as well as your credit report with any explanations included. With this complete file, your loan will be submitted for final underwriting review.
An explanation is typically needed when there is something on your credit report, a transaction in your bank statements, or anything else that may need further explanation to the underwriter to ensure that those items are not a factor in denying your loan.
8. Underwriting Review
With all the information and supporting documentation gathered, the loan goes in front of a underwriter for full compliance review. This approval will be the final review before getting your loan closed.
Full compliance review means that they are going through every document submitted with a fine-tooth comb to ensure every I is dotted and every T is crossed, they are signed where they need to be signed and ensuring that there is no further information needed.
This process may call for additional information, the more prompt you are at getting it submitted, the quicker the process will go.
9. Insurance Policy Formalized
At this point, it is important to finalize your hazard insurance policy with your insurance company. If the home is located in a flood zone, additional coverage may be required.
Your insurance company will notify you if the home is located in a flood zone and if you need that additional coverage. This is coverage that is not necessarily required, but strongly recommended.
Your flood zone will also determine whether or not it will be a good idea to get flood zone coverage.
Zones range from a minimal to moderate risk of flooding every year.
The property’s elevation is also taken into consideration.
10. Doc Preparation
With a final approval and insurance policy, your loan processor will request your final documents to be prepared and sent to title.
Upon receiving the docs from your Mortgage company, the title company has additional documents that they prepare, and once those two are complete they will call you to arrange a time to sign your closing papers.
You will have the opportunity to do a Final Walk Through of the property before closing to ensure that the house is in the same order as when you viewed it day one and that all terms agreed upon in the negotiations have been met. For example, the seller did not swap out the appliances or there are suddenly huge holes in the walls that were not there before. These things have happened, people do crazy things.
12. Funding and Closing
Once you have signed your documents at title, a wire for the amount of the loan will be sent from the lender to the title company. Upon receipt of those funds, the title company will record the purchase with the County Recorder.
When confirmation of the recording comes through, the title company will issue a check to the seller and you can MOVE IN, granted you have immediate occupancy!
Recording is the process of filing or placing a document in the public records to serve constructive notice of the existence of the document and rights contained. This would be done at the Register of Deeds. There will also be 2 very important documents that the title company will point out to you at the closing table that you will need to take to the assessors office to be filed, your original documents will be taken to be filed and you will be given copies with stamps on them acknowledging the receipt and must hold on to them in case they are not filed properly. You will not know until tax time the following year and if you don't have your receipt, you will not be able to prove it was ever done.
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Paperwork, lots of paperwork and signing. You might want to invest in a signature stamp for closing day. Too bad you can’t, lender wants original signature for all mortgage documents.
You’ve completed all the previous steps and are now ready to take possession of your new home. So many things to consider, granted the seller has offered immediate occupancy, you get the keys at closing and get to open the front door to your new home that same day. You now have possession, the control a person intentionally exercises toward a thing (thing being the house or property).
Now what? Do you have things that need to be moved in? Are you planning on cleaning before moving your personal items in? There are services out there to help you along the way. You can opt to have a moving company handle everything and you will go to work in the morning and when you come home your house is set up, even the clothes are placed in the closets.
Are there any improvements you would like to have done on the home before you stay the night? New carpet, maybe hardwood… paint, new fixtures, how about the outlet covers and vent covers! It is recommended to go through your new home, once the dust has settled and make a checklist of things that you want done right now, things that you would like to update in the future, and things that made you fall in love with the house.
I hope that the information provided will help bring the home buying process into perspective. I know, there’s a lot of information that has been covered, but I didn’t want there to be any surprises along the way. This entire process can be smooth sailing (for the most part) if you have the right Realtor on your side looking out for your best interests which is why that is the very first step anyone looking to buy a home should take.
My competitive nature drives me to performing for my clients at the highest level. I believe my service commitment does not end at the closing, but carries through while I am still blessed enough to ....
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The purchase of a new home can bring out a large mix of emotions. Excited, Scared, Happy, Sad, Nervous to just name a few. You may think you know everything there is to buying a home or you may