Six steps to the home buying process!

Buying a home of your own is an important milestone.  There are many steps along the way to becoming a homeowner and many decisions for you to make.  Here are the steps in the home buying process:

STEP ONE:  Is owning a home right for you?

There are many factors to consider when thinking of buying a home.  Are you planning to be in the area for 5+ years? .  Are you ready and have the time to maintain your home? 

 The freedom of having a place of your own and the benefit of an investment where the equity potentially increases, coupled with the tax benefits, make homeownership a smart decision.    

STEP TWO:  Look at your finances

How much can you afford?  Do you have money saved for the down payment?  Begin by analyzing your current monthly expenses.  It might be necessary to cut back on some areas of spending in order to afford a mortgage payment and other monthly costs. Check your credit report for any errors before meeting with a mortgage lender.  You can obtain one free copy of your credit report per year.  If there are errors or discrepancies, take immediate action to correct them.  The three major credit reporting bureaus are Equifax -  www.equifax.com, Experian – www.experian.com,  Trans Union – www.transunion.com.  Gather the items you will need to speak to the mortgage loan officer.  Pay stubs for the past three months, amount of credit card debt, proof of any other income, W-2 forms for the past two years, and recent bank statements from all accounts.

Mortgage Pre-Qualification – Once you have an idea of what you are comfortable spending on a monthly basis, your lender will give you a mortgage pre-qualification.  A mortgage pre-qualification gives you an estimate of the amount of money you can borrow to purchase a home.  You will need to provide your lender with information on your income, assets and debts.  There is no fee for a pre-qualification and you are not committed to obtaining a loan.

Mortgage Pre-approval – A mortgage pre-approval is not the same as a pre-qualification.  A pre-approval means you have completed the application process and have a written commitment from the lender to give you a loan for a certain amount. 

STEP THREE:  Find a home

What kind of home is right for you?

Start off by making a wish list of the things you must have in your new home.  What kind of home is right for you?  How many bedrooms and bathrooms do you need?  Where do you want to live?   Are schools and shopping and work  conveniently located?

Find a  REALTOR

There are several ways to find a REALTOR.  Some people meet area REALTORS by attending Open Houses, others  browse real estate websites and choose a couple agents to interview in person,  but I still think the most foolproof way is to ask family and friends for a recommendation.  You will want the REALTOR to work for you as a “buyer’s agent”.  Make sure the agent you select is licensed in the state and is familiar with the areas you are considering. 

Selecting a home

Once you have selected a REALTOR to help you in your search, let them know your home requirements and how much you can afford to spend.  The REALTOR will show you the homes that fit your needs.  Take your time when viewing a home.  Make notes of what you like and dislike.  Once you have found the home that bests suit your needs, you and your REALTOR will submit an offer in writing.  This offer will be accompanied by earnest money check that will be applied to the purchase price at closing.

Making an Offer

An offer is a written proposal stating how much you are willing to pay, the closing date and numerous other terms and conditions that the buyer and seller need to agree upon.  The offer will include an expiration date, at which time the offer becomes null and void if the seller has not responded.

Once your offer has been presented to the seller, the seller can accept the offer, reject the offer or give you a counter offer.  You are free to do the same process – accept, reject or counter.  Keep in mind, time is of the essence.  You need to respond to each counter in a timely fashion.  During this time frame other offers can be submitted to the seller.  The offer does not become a binding contract until both parties agree to the terms and provide signatures.  Once the offer is accepted and signed by all parties, your earnest money check is cashed by the listing real estate company and held in their trust account until closing.  At closing, the earnest money will be applied to your purchase price.

Home Inspections

A professional home inspection should be completed prior to closing.  The purchase contract must contain a contingency that allows you to have the property inspected and allows you to renegotiate with the seller if repairs are necessary or have the option not to purchase the property if the inspector reveals serious defects with the home.

The inspector will provide you with a written assessment of the home.  After you carefully review the report you and your REALTOR will submit in writing any repairs you would like the seller to do before closing. 

Other inspections include termite, radon, and septic, well, survey.

STEP FOUR:  The Mortgage

You will provide your mortgage lender with a copy of a fully executed sales agreement and this will start the ball rolling!  The appraisal of the property will be ordered and a title search will be conducted by the attorney.  A title search is to verify that the seller truly owns the property and that property is free of liens and encumbrances.  All liens that are attached to the property must be paid by the seller at the closing.

The lender will provide you with a “good faith estimate” which is an estimate of all the closing costs you will be required to pay at closing.  Once the appraisal, title search, and all necessary inspections are complete, the lender will send the entire “packet” of information to underwriting for approval.  Once it is approved, the lender will issue a loan commitment and a closing date and time can be set. 

STEP FIVE – Prior to closing

There are typically a few tasks that you will need to complete prior to closing.  You will make arrangements to place the utilities in your name as of the date of closing.  You will need to obtain homeowner’s insurance policy prior to closing.  A paid receipt and declaration of issuance must be presented at closing.

The Purchase agreement should include a clause allowing you and your REALTOR to conduct a walk-through inspection of the property.  This final inspection gives you the opportunity to make sure the seller has moved all their personal belongings and have completed all agreed upon repairs.  Make sure all appliances and systems are in working order and that any items the seller agreed to leave behind are there.

STEP SIX – Closing – You made it!

The closing is when the buyers, the sellers, your REALTOR, your lender and the closing attorney all gather and complete the final paperwork to purchase the home from the seller.  The buyer and seller will review the settlement statement or HUD-1.  The settlement statement is a list of all the fees paid by the buyer and the seller.   All mortgage documents will be reviewed and signed. You need a certified check to pay for your closing costs.  You will receive the keys and the deed will be recorded at the Court House.   The final closing normally takes an hour.