The Process
You decide to buy a house! The first step in the process is evaluating your motivations for wanting to purchase a home and being able to focus on that goal. For some the process can take 2-3 months, for others it may be 6 months or more. Regardless, the process remains the same:
1. Choose a RealtorÆ and a Lender
1. Choose a RealtorÆ who is knowledgeable, dedicated and enthusiastic about bringing you on as a client. The entire process requires a great amount of planning and communications and you will rely heavily on your RealtorÆ to guide you through it smoothly as possible.
2.Choose a Lender: Most buyers choose a lender a little differently… usually who can give you the best financial deal. Compare a few lenders – check rates and closing cost estimates – and ensure you have a good feeling with them – so you have all your cards on the table and can make an informed decision.
2. Prepare and Prospect
3.Pre-Qualification: There are a few steps in obtaining approval for financing:
| Pre-Qualification |
You talk to the lender and verbally discuss your financial standing, salary, etc. and they lender gives you a range of what you would qualify for in a mortgage. |
| Pre-Approval |
You have taken an online application with the lender, credit has been pulled, supporting documentation has been provided, and the lender has submitted the file to the automated underwriting system for approval. |
| Underwriting Approval |
You have found a home, ratified a contract and the lender approves you for the mortgage, through their underwriting policy, in connection with an acceptable property, providing a commitment letter for the mortgage. The appraisal has been completed and you have satisfied all conditions of the loan. |
4. Determine Criteria: Determine the criteria you require versus what is nice to have. You want to explore the ideal options first, and whittle down the less important criteria if you are not finding the right home further in to the process. Your RealtorÆ will discuss the options available and keep in mind that your criteria can change while you go through the search (and that’s okay!).
5. Home Search Online: After determining your criteria, your RealtorÆ will begin the search online and narrow the field of options based on your input. Your RealtorÆ has access to all of the available homes for sale through his/her membership in your local Multiple Listing Service database. Of course, you will have the ability to search online yourself and share what piques your interest with your RealtorÆ.
6. Home Search Viewings: Once you and your RealtorÆ have narrowed down the options, you will get in the car and see them in person. Your RealtorÆ will make the necessary arrangements to view each listing. All you need to do is get in the passenger seat and let him/her take you away to find your dream home!
Purchasing Tip: Communicate with your RealtorÆ! Even the best RealtorÆ can’t read your mind!
Purchasing Tip: Funds Needed Prior to Settlement
Earnest Money Deposit - The EMD is required as part of your offer and is typically 1-5% of the purchase price. It guarantees to the seller that you are serious when submitting your offer. It also is the seller’s first recourse if the contract terms are not met. Once you are at settlement, the EMD is applied as a credit toward your purchase price.
Home Inspection - While a home inspection is optional, I highly recommend one for your new home. The home inspection is completed by a licensed party of your choice within a time frame specified in the contract. I will make the arrangements for you, as well as attend the inspection with you. The fee for a home inspection is around $275-$350 for a condo and $400-$500+ for attached/detached homes and is due at inspection.
Home Owners Insurance - Lenders usually require a hazard insurance policy. You should be aware that many factors affect the availability and cost of hazard insurance. Depending on the insurance company, these factors may include past insurance claims filed on the property, past insurance claims filed by you and your credit history. You should contact your insurance agent directly to verify your qualification.
***Condo Owners Insurance – if buying a condo, the condo fees will include a master insurance policy for the exterior of your new home. However, your lender may require you to obtain supplemental insurance called an HO6 policy. This policy can include “walls in” coverage, as well as personal property insurance. If the property needed to be rebuilt, this insurance would cover basic appliances and get the property back to its original interior condition.
3. Purchase
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Develop and Submit Offer: You found the right house and now you and your RealtorÆ will develop and submit an offer to purchase. All of the documents are standard forms from the state or city associations and your RealtorÆ only enters information specific to your transaction. Some of the most important terms you will discuss with your RealtorÆ are:
- Sales Price
- Financing Details / Deposit
- Settlement Date
- Contract Contingencies
2. Negotiations and Ratification: Once the offer is presented to the seller, they will accept, reject or counter the offer. This is where negotiations begin and end (hopefully in your favor!). After all terms have been agreed to and signed off by both you and the seller, the contract is ratified and your obligations to performing the contract begin. Your RealtorÆ will keep track of what you need to accomplish, as well as other parties in the transaction.
3. Fulfill Contractual Obligations:
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4. Move-In Preparation:
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Purchasing Tip: Settlement Options and Fees
Settlement Company - By law, you and the seller have your choice of settlement agency, as proposed in the offer and negotiated if needed between both parties. I have recommendations that provide solid service and competitive rates.
Settlement Date - Settlement date is the end goal of real estate transactions. The date set forth in the contract is the basis of your performance on the contract; everything must be completed and processed by settlement date. Settlement date is your choice, but can be a negotiated term with the seller. Settlement date is also your possession date of your new home!
Closing Costs - Your lender will provide you with a Good Faith Estimate of what you will owe in personal funds at settlement. Certified funds (cashier’s check, bank wire, money orders, etc.) are required for closing costs and you will be informed prior to settlement regarding the estimated amount you owe. However, you’ll want to have your checkbook with you at settlement to account for any last-minute changes.
4. Closing and Move-In!
5. Congratulations! You lived to tell the tale and can now sit back and enjoy your new home!
