By RJ Avery
The approval or pre-approval process is definitely one of the most important steps in buying a home. By talking with one or more reputable lenders you can establish that your credit score is sufficient and what type of buying power or how much home you can afford. If a lender tries to charge you for a pre-approval or credit report or takes a long time to return an initial phone call do your self a favor and move on. Availability and Response in this business can be the difference in getting the keys on Friday afternoon like you planned or having to wait until the next Monday because your lender and Realtor were not responsive to a last minute need that may have popped up.
Buying a home is nothing to dive into on a whim. Unlike renting there are a few other cost associated with owning a home. 1) Taxes and Insurance – These are an added cost,however in many markets you can get a home for the same total monthly payment including your mortgage payment as you can rent one for. 2) Utilities – If you are coming from an apartment or from a smaller home to a larger home you do need to consider the extra money it will cost monthly to pay for the extra usage. Especially in the case of Homes with pools or homes that are older with no upgrades and old Heating and Air Condition Systems. 3) Maintenance – There is no landlord to call when something breaks and licensed professional repair and maintenance men do not come cheap. So always consider the age of the home and any major problems coming in the future. (ie roof, heating & air, water heater or other appliances) Home Warranties are widely available and typically cover all the things mention above for a yearly premium.
Count Your Dollars
Definitely run a budget and make sure that if you can foresee problems in the future for the home, make sure that your budget will be in a position to begin saving money to be prepared for these problems. Also when buying a pre-existing home account for annual maintenance. Mainly pest treatment, heating and ac maintenance, and yard and landscaping needs. At the end of the day doing improvements and maintaining your new home can be very rewarding but is always best to be done responsibly.
Decide on an Area
Obviously you will know what you are looking for in an area, whether it is good schools with a easy commute or a location that it near great entertainment and dining areas. Get these things on paper and discuss them with your Realtor as they can probably point you to areas you may not have thought about or even bring up some other things to consider that line up with the rest of your wants and needs in a home. Once you have settled on a few areas go and drive around and see what you think. If you feel so brave knock on a door or stop and talk to someone who is outside and find out what they think about living there. Many time locals can be a great source of information about an area for obvious reason.
Educate yourself on the Market
I always prefer working with a buyer a few months before they are ready to make a decision in order to acclimate them to the market. This means I an send them searches of their desired areas and they can keep an eye on the actual prices that things are selling for. So that when it is time to go and look at homes and we find one that really is a good deal, typically foreclosure, they are comfortable pulling the trigger quickly. Waiting to make an offer on a well [riced property is a grave mistake many people make when shopping for a home.
Do your best to find out more information about the different areas or subdivisions. How are the schools? Is there new Construction near by? If so what is it selling for? How many foreclosures have sold in the neighborhood? If so how much less did they sale for than market value? Asking these and other questions related to the area you are interested in will definitely help you make an informed decision.
Find your Home..
Sounds so simple. Sometimes it is, but most of the time it is a process that can be both arduous and long. A good Realtors job is to keep you focused and make sure you efficiently view the properties that match your criteria and that when negotiating you put your best foot forward without giving away the farm or insulting the seller. When looking for a home be weary of the Realtor who looks on the bright side of every home. The way I approach viewing homes is that as a Realtor it is my job to point out the issues that the home has and how it compares to other ones you have seen that you like. Ultimately as your buyers representative my goal is to make sure that you are happy with your new home no matter which one it is. Also be weary of the Realtor putting the hard sale on any particular house unless it is a foreclosure that is obviously priced well. In new construction and even pre-existing many sellers will offer bonuses to Buyers agents that unless the Realtor discloses it to their buyer will not be disclosed until paperwork signing or even as late as closing. Dont forget that if you are looking at new construction it really is best to be represented by a Realtor. I have heard countless stories of home buyers signing contracts not completely understanding financing contingencies only to find they cannot qualify and are out whatever Earnest Money they put down. At the end of the day a qualified Realtor can negotiate a very good deal for you with any Home Builder and protect you from un-forseen pitfalls that could effect those who are not familiar with the Home Buying process.
Get A Contract
So you have found the home that will be your new home. Now it the time to negotiate that contract. Upon making an offer your Realtor should be able to show you the numbers of comparable sales in the Area to make sure that you initial offer is not to high, but at the same time not insulting to the Seller as to make them tighten up on negotiations. Below are the items that are typically negotiated in every Real Estate transaction.
Sales Price – Fairly self explanatory
Owners Title Policy – In the majority of pre-existing sales this is paid by seller, however is negotiable. Basically this insures that if the title company has done anything wrong in their title search that no one can come back and claim right to your new property
Survey – In cases of financing a home or buying a large piece of land that is un-platted the buyers lender or the title company may require a Survey of the property. If the seller has a survey that is not to old and the property is still the same as it was when they bought it many times the lender or title company can accept this.
Closing Costs – On many loans the seller is allowed to pay buyers closing costs. Basically depending on whether you are paying cash on a property and the price their can be anywhere from 1% to 6% closing cost. These are title, loan and lawyer fees as well as insurance and tax escrows in the case of financing. These are 100% negotiable and unless the Seller has stated they are willing to pay closing costs then they are in no way obligated to. If they are working with a good listing Realtor they should be well aware that many home buyers ask for these closing costs. So ultimately if you offer $100,000 for a home and ask for $5000 in closing costs you are really only offering the Seller $95,000
Home Warranty – Once again a good Sellers Realtor should let them know that many times in pre-existing construction a Home Buyer is going to ask for a Home Warranty Policy. Basically these range from $350 to $650 and plus a year and covers and problems they may have with the major systems of the home.
Closing Date – This is the date by which you will be able to get your funds together to transfer title of the house. The most important thing here is making sure that your lender and Realtor are on the same page and that the Realtor has allowed enough time for the lender to do his or her job. Average close time is 30 to 45 days after contract
Temporary Leases – Many times sellers will request a temporary lease for 24 to 72 hours after closing. I always tell my buyers not to worry about this as it is a very fair protection for the seller. Sadly sometimes deals go as far as the day before closing and fall apart. So if the seller has already moved out or worse yet purchased another property they are left holding the bag.
Help get it closed
Not really as hard as it sounds. In today’s lending climate lenders need a lot of documentation. Making sure that you get this to the lender in a timely fashion is the main thing that matters from the buyers perspective that will keep the purchase process moving smoothly. Also making sure that you heed your Realtors advice on getting your Inspections performed ASAP as to allow maximum time to negotiate any repairs that may be needed. While in the process of buying a home make sure that you speak to your lender before making any large credit driven purchases as this can many times effect the loan near the end especially if the bank calls for a new credit report.
Inspect the Property
Most of the time you will have a 10 day option period to inspect a property. My advice is always have the inspector lined up and ready to go as you end the negotiations so that you can hopefully have them in the house in the first couple days of being under contract. Once the inspector goes through the property they will provide you with a report giving you an over all idea of what the condition of the property is. Talk to your Realtor and let them help to figure out if it looks like you have some items that maybe you should consider or if as a whole the property appears to be sound.
Simple as that. Your Realtor and Lender will coordinate with the Title Company for a time for you to come in and sign the papers on your new house. A day or so before closing the Title Company will generate what is called a HUD-1 statement. This outlines all the finances of the deal and will let you know exactly how much the check you will need to bring to closing. Once documents are signed it can take anywhere from an hour to 24 hours to fund. Once funded your new home is yours.