Facts:
- You can very likely afford to buy if you are paying rent.
- Find the right home, and make sure you have the ability financially to hold onto it for the long run.
- Purchasing your first home does not always mean having to make a large down payment.
- You can probably still buy a home with a less than perfect credit score.
- Buying your first home now gets you closer to owning your dream home.
- There are many professionals available to help that take the complexity out of buying a home.
2. Hiring an agent.
A number of individuals are necessary to carry out the typical real estate transaction. These include insurance assessors, mortgage brokers and underwriters, inspectors, appraisers, escrow officers, buyer’s agents, seller’s agents, bankers, and title researchers, just to name a few. Your real estate agent is responsible for coordinating all of these professionals and are your advocate. Your agent will keep your goals and interests as their top priority throughout the home buying process and will orchestrate all actions and decisions in order to successfully close the purchase of your home.
Your real estate agent will educate you about your market and analyze your wants and needs. They will be able to guide you to a home that fits your criteria. Once that home is located your agent will coordinate the work of other needed professionals and make negotiations on your behalf. Paperwork and deadlines will be checked, and double-checked, and any problems that arise will be addressed and solved.
3. Secure financing.
Although the thought of shopping for a home is thrilling, the thought of taking on a mortgage can be overwhelming. Many first time home buyers put off buying a home due to confusion and nervousness about making such a large financial commitment
Breaking the process down will help you decide if and when you are ready to buy your next home.
- Choose a lender, a loan officer, or mortgage specialist. If you want, your agent can help with this.
- Complete a loan application and get preapproved.
- Determine what you want to pay and select a loan option.
- Your agent will provide you with homes to view meeting your criteria, and in your price range.
- Once you find your home and your offer has been accepted, submit the contract to the lender.(Once the appraisal, inspections, and title commitments are completed, the closing process proceeds and the loan is funded at closing.)
4. Finding your home.
Hopping in the car and looking for a home is probably the most exciting part of the home buying process, for a while. If weeks go by without finding that much desired home, the fun fades. Carefully assess your values, wants, and needs, both for the short and long terms.
Ask yourself:
- Where do I want to live? Do I want to be close to work? Do I want to be in a good school district? Do I want to have access to a turnpike or highway?
- What size home do I want, and why?
- Which is more important: location or size?
- Am I be interested in a fixer-upper?
- Do I want to be in an area where home value appreciation is most likely?
- Is neighborhood stability a priority?
- Am I interested in a condo, a town home, a patio home, a gated area, or a home with land?
- Do I want to look at new homes?
- What features and amenities do I actually need, and which do I just want?
5. Making an offer.
Now it’s time to be a businessperson. The offer and negotiation process needs to be approached with a calm and realistic perspective of your market. The three basic components of an offer are price, terms, and contingencies.
PRICE: The right offer must be priced fairly in order to reflect the true market value of the home you want to buy. Your agent’s market research will guide this decision.
TERMS: These are the other financial and timing factors included in the offer.
CONTINGENCIES: The conditions where a contract would cease to exist upon the occurrence of a certain event, such as the failure of a buyer’s current home to sell in order for that buyer to purchase the home under contract.
There are six basic categories in a real estate offer:
- Schedule-A schedule of events that has to happen before closing.
- Conveyances-The items that stay with the house when the sellers leave.
- Commission-The real estate commission or fee, for both the agent who works with the seller and the agent who works with the buyer.
- Closing Costs-The standard is for buyers to pay their closing costs, but if you want to roll the costs into the loan, you need to write that into the contract.
- Home Warranty-A home warranty covers repairs or replacement of appliances and major systems. You may ask the seller to pay for this.
- Earnest Money-This protects the sellers from the possibility of the buyer unexpectedly pulling out of the deal and makes a statement about the seriousness of your offer
6. Perform due diligence.
If something breaks or doesn’t quite work like it’s supposed to, you can’t return your home as you would with other purchases. That’s why home owner’s insurance and property inspections are so important.
A home owner’s insurance policy protects you against loss or damage to the property itself. It also protects you against liability in case someone sustains an injury while on your property.
A property inspection should expose many hidden or unknown issues so you know exactly what you’re getting into before you close the deal.
- Structural damage is the major concern.
- Things that are easily fixed can be overlooked.
- Any big problem revealed by your inspections should be referred to a specialist. If the problem is more than you are able to deal with, you may want to walk away from the purchase.
7. The final stage, closing.
Once you have your lender’s confirmation of the home’s value and legal statue, and your continued credit-worthiness, you are ready to close. This includes a survey, appraisal, title search, and a final check of your credit and finance. Everything is now pretty much out of your hands, and your agent will be responsible for keeping you informed until time to close.
Your preclosing responsibilities include:
- Controlling your finances.
- Return all phone calls and paperwork promptly.
- Stay in touch with your agent, at least one per week.
- Confirm with your agent that your documentation is in place and in order.
- Obtain certified funds for closing, usually in the form of a cashier’s check.
- Conduct a final walk-through to verify repairs were made, and that the home is in acceptable condition.
On closing day you will sign many documents. You will attend closing with your agent, and a settlement agent provided by the title company. You will sign documents that do the following:
- Finalize your mortgage.
- Pay the seller.
- Pay your closing costs.
- Transfer the title from the seller to you.
- Make arrangements to legally record the transaction as a public record.
Regarding title transfer, the Title Company will provide you with a Title Insurance Policy-Title insurance is a type of insurance policy meant to protect home buyers, as well as lenders, from any damages or losses caused by a bad title. Most title insurance policies cover all the common claims filed against a title, including outstanding liens, back taxes and conflicting wills. After “title is opened” by depositing your earnest money check and taking a copy of the contract to the specified Title Company, the title company will perform a title search. The Title Company’s legal department will review all paperwork and issue the Title Insurance Policy.
Closing day is a momentous conclusion to your home-searching process, and begins your home-owning experience.
8. Finally, you will want to protect your investment.
You and your agent have probably gotten to know each other fairly well. Continue to stay in touch with your agent, even though the home-buying process is now concluded. Agents love to hear from their clients and are an excellent source of information.
Your agent can provide information on:
- Handling your first tax return as a home owner.
- Finding contractors to help with home maintenance or remodeling.
- Helping your friends and family find homes.
- Keeping track of your home’s current market value.
Paying attention to home maintenance ensures protection of your long-term investment.
Keep it clean, and keep an eye on it:
- Keeping it clean: Perform routine maintenance on your home’s systems (heat/air, plumbing, electrical), depending on their age and style.
- Keeping an eye on it: Watch for signs of leaks, damage, and wear. Fixing small problems early can save you big money later.
