Buying a home can be a very intimidating process, especially if you’ve never done it before. So the first thing you should do before you start the home buying process is to figure out whether owning a home is right for you. It may or may not be and this decision depends on you and what your circumstances are. Take into account that if you do buy a home, there are extra responsibilities and costs that go along with owning a home-such as lawn care, home maintenance and repairs, etc.
Step 1 – Define the needs for your new home
Your first step toward buying your new home will be to analyze your needs. Your real estate agent can help you determine exactly what you want your new home to look like and how it should function for you and your family. First, write down what you are looking for, your want’s list and your need’s list. In a perfect world, your new home would fulfill both lists 100 percent, but it is more likely the two lists will turn into a list of priorities, as you get clearer about what you want and what is available. Second, establish a time frame for buying a home. . Depending on your reasons for wanting a new property and the current state of the market in the area you are looking to buy, you should be able to come up with a rough timeline.
Step 2: Getting Pre-Approved
Before getting a mortgage or any kind of loan, you should always check your credit. Scores range from approximately 300 to 850; generally, the higher your score, the better loan you’ll qualify for. Don’t forget to check your report for errors. If there are any, dispute them. It may help your credit score
Now that you know what you want in a home, you need to find out what you can afford. There are two ways to go about this: prequalification or pre-approval for a loan. Either way, you can contact your agent about choosing a mortgage company or ask about their preferred lender. In order to get a pre-approval, the lender will perform an extensive check of your finances including your credit rating, whether or not you’re a first-time buyer, what your debt load is, how much money you have to put as a down payment, etc. This figure will be a relatively reliable estimate of what you can afford..
Step 3 – Choosing the right neighborhood
Now that you have your list of needs and wants and know how much you can afford to spend, it’s time to look at some houses, right?! Well, don’t forget, people don’t just buy a house; they buy the neighborhood the house is in. Think about that…if you found the perfect house but it was in a neighborhood that was not to your liking, would you make an offer on it? You will need to make another list for the type of area you want to invest in. Consider things like drive time to work and major destinations, amenities such as swimming pools, tennis courts, parking, etc., area schools and the demographics of the surrounding area. things like drive time to work and major destinations, amenities such as swimming pools, tennis courts, parking, etc., area schools and the demographics of the surrounding area.
Step 4 – Finding a home
At this point you will have a good idea of what you can afford and the type of area you will want to invest in. It’s time to begin your home search. Possibly the most efficient way to find homes is to allow your real estate agent to keep you up-to-date on available properties that meet your criteria. When your agent presents you with a home that interests you, he or she can arrange for you to tour it at your convenience.
Step 5: Make an offer
Now that you’ve found your dream home, it’s time to make an offer. Your real estate agent will help you determine the offer price by reviewing recent sales of homes that are similar in size, upgrades, and location. Your real estate agent will advise you on how to create an offer that will have the best chance of being accepted. After consultation with you, your agent will create a written contract with your offer. This document details what needs to be done by both parties to execute the transaction. It should protect the interests of both parties and will ensure your financial position as the buyer.
- The contract should include, but is not limited to, the following:
- Earnest money deposit
- Financing terms
- Inspection terms
- Seller’s Disclosure Form
- Comprehensive Rider
- Various addendums
- Disclosures: Lead paint, HOA, CCCL, Condo, etc.
- Closing instructions
Remember the legalities of this phase are very important. If you have any questions or concerns, be certain to address them with your real estate agent right away.
Step 6: negotiations
Once your offer is made you may need to negotiate with the seller to reach an agreement. Keep in mind almost everything is negotiable when you are buying a house. This can give you a great deal of leverage in the buying process, that is, if you have adequate information and you use it in an appropriate manner.
Items considered in the negotiation phase often include:
- Market value of the house
- Condition of the house
- Financing terms
- Circumstances surrounding the sale
- Loan preapproval at the time of the offer
- Earnest money
- Once your offer has been presented to the sellers, they will either accept it, counter it or reject it. Often times, sellers accept portions of the agreement but counter other portions. Once the contract is mutually accepted by both buyer and seller, the rest of the purchase process begins.
Step 7 – Inspections and mortgage lender coordination
After your offer is accepted, your agent will help you coordinate the activities of service providers and serve as your advocate when working with them. Your agent will make sure these vendors have access to the property to perform their procedures and will oversee the execution of those procedures on your behalf. One service you may need is an inspection. An inspection of the property, the foundation, and the surrounding environmental may be needed to make sure the property meets the standards set forth in your written agreement. If there are issues or inconsistencies brought to light during this time, it may void the contract or give you an opportunity to go back and re-negotiate.
Insurance is another item that will need to be taken care of. Homeowners insurance protects against theft, fire and liabilities. It often includes things such as bicycles, furniture and jewelry. Flood insurance is generally only necessary for flood-prone areas. The federal government issues this kind of insurance. Having these procedures done in a timely and professional manner is a must. Investigate each service provider to make sure they are reputable and have a clean operational history. Your agent’s experience in this area will be invaluable.
Step 8: Title Insurance/Closing Process:
As the closing date draws near you will need to be in contact with the escrow company or closing attorney and your lender to make sure all necessary documents are being prepared and will be delivered to the correct location on the appropriate date. Be sure you talk to your mortgage banker to understand all the costs that will be involved with the closing so there are no surprises. Closing costs will likely include (but are not limited to) your down payment, title fees, appraisal fees, attorney fees, inspection fees, and points you may have bought to buy down your interest rate. Find out what form of payment you will need to bring to the closing for any unpaid fees. Make sure that your payment is made out to the appropriate party.
What the closing company does:
- Requests a title report and policy
- Drafts the deed and/or other necessary documents
- Arranges to pay off existing loans when necessary
- Prorates taxes and insurance between buyer and seller
- Computes interest in loans
- Records the appropriate documents
- Disburses the documents and money to each party involved
These days, buyers and sellers don’t even have to be in the same room to close a deal. Thanks to computer automation, signed paperwork can be delivered overnight to both parties.
Step 9: Closing
Closing is where ownership of the home is legally transferred from the seller to the buyer. It is a formal meeting that most parties involved in the process will attend. Closing procedures are usually held at the title company’s or lawyer’s office. Your closing officer coordinates the document signing and the collection and disbursement of funds. In order for the closing to go smoothly, each party involved should bring the necessary documentation and be prepared to pay any related fees (closing costs). There may be more than one form of acceptable payment for your closing costs so ask the closing officer which form of payment will be required and to whom it should be paid.
Step 10 – Moving In
Congratulations on the purchase of your new home!
Now that you have taken ownership of it you will need to have your electricity, cable and phone set up. Also be aware of typical homeowner expenses such as Neighborhood Association fees, landscaping costs, and annual taxes and budget for them accordingly.
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