Purchasing a home can be a frightening and costly experience. The process is constantly changing and potential pitfalls seem to lurk around every corner. Learning as much as you can ahead of time will help ease your mind as you go through this exciting but challenging time. It is beyond the scope of this free report to cover everything in the home-buying process but here are some major things that you need to know:
1. CHOOSE A LENDER. With rare exceptions, most lenders have similar type loans at roughly the same cost to you. This being the case, you will probably use good service and excellent rapport as the main yardsticks in selecting your loan officer and lending institution. Your Realtor® and/or friends who recently financed a home can be good referral sources for you. Talk with the individual loan officer you’re considering. Are they knowledgeable and helpful? Do you feel like you can work closely with them? Get a good relationship going and stick with it.
2. GET PRE-APPROVED FOR A LOAN. A buyer shopping for a home who is pre-approved has a big advantage in the home negotiating process. To get pre-approved, you must actually formally apply for your loan and pay for your credit report. The lender will process and (hopefully) approve your loan. They will then give you a written loan commitment. This lets you shop with confidence knowing that your money is waiting. It is also very reassuring to the seller since already being approved makes you like a cash buyer. This can give you a huge edge in buying, especially if another buyer is competing for the same house with you. As an additional benefit, pre-approval lets you close on your new home more quickly.
3. UNDERSTAND THE TYPES OF LOANS AND COSTS. Your lender and Realtor® should help you in choosing your financing. Broad categories of loans include FHA, VA, and conventional. Sub-categories include fixed rate, adjustable rate and various permutations of these. What type of loan you select depends on the loan amount, how long you’ll own the home, your funds available for down payment, the amount of closing costs, etc.
Costs of obtaining the loan, called “closing costs”, will typically run 3-4% of the loan amount. The lender will give you a written “good faith” estimate and breakdown of these costs early in the loan application process. In addition to closing costs, you will also have pre-paid expenses that include such things as getting your hazard insurance policy and setting up your escrow account for your property taxes and insurance.
4. GET YOUR HAZARD INSURANCE AHEAD OF TIME. Your lender won’t fund your loan unless you have a hazard or homeowner’s insurance policy protecting the property. In this region, we are considered to be in a hurricane hazard area. If a potentially dangerous storm is within 500 miles of Tallahassee, you may not be able to get your policy issued until the danger is past. This might hold up your closing and moving. You can avoid this last minute snag by paying for the policy and getting a written binder from your insurance agent well ahead of your scheduled day of settlement.
5. WORK WITH A GOOD REALTOR®. As you may be learning from this report, the buying process is complex. A professional real estate agent that specializes in residential sales can save you a bundle of money. Just as in any business, there are good agents and bad ones. Go to open houses and meet some agents. Interview several agents and choose the one you feel most comfortable with. A great agent is worth his or her weight in gold. Your agent should be able to walk you step-by-step through the process and give you the benefit of his/her experience.
6. LEARN THE MARKET. Look at enough homes by going to open houses and seeing homes with your agent so you have a good feel for home values. Talk to people and ask questions. Ask your agent to run a computerized comparative market analysis (CMA) on any home you are considering so you can be sure the asking price is in line with other recent sales. Time spent in research can pay big dividends in arriving at a fair final sale price.
7. UNDERSTAND THE INSPECTION PROCESS. You should hire a licensed home inspector to check the structure, appliances and systems in the home of your choice. You will have 10 days after signing a sales contract to have your inspection done and report the results to the seller. The home will most likely have some minor problems – this is normal and shouldn’t be alarming. Unless you’re buying a new home, you should expect some wear and tear. The main purpose of the home inspection is to be sure there are no major deficiencies. You need to identify any big concerns and negotiate a mutually agreeable solution with the seller.
There will also be a wood-destroying organism report done. This is to check for any wood destroying organisms and/or any damage. If infestation is found, the seller typically will have this treated. If damage is discovered, the seller usually will repair it up to the cost ceiling written in your sales contract. Some buyers choose to have radon tests done and, if the home was built prior to 1978, a lead-based paint assessment.
8. TAKE CARE OF THE DETAILS. Because of the complexity of a modern real estate transaction, you must fully understand the responsibilities of all parties involved. A carefully worded sales contract and the additional addenda involved will help spell out who does what and when. There are very specific time lines for certain things to be done and your purchase may be in jeopardy if you miss one. For example, if you don’t have a home inspection done and results reported within 10 days of signing of the sales contract, you lose your right to have an inspection. Your Realtor® should help shepherd you through this process.
9. DO A FINAL WALK-THROUGH INSPECTION. This final walk-through inspection is done to be sure that all appliances and systems are still operational as required and to be sure the property is still in the same condition as when you signed your sales contract. You should do your walk-through inspection a day or two before your scheduled closing. If any new deficiencies are noted, you should submit them in writing to the seller as quickly as possible so they can be corrected prior to closing.
10. GET THE CLOSING DOCUMENTS AHEAD OF TIME. Whenever possible, have your agent get your closing papers ahead of time and go over them with you. This way you can look over exactly what you’ll be signing and you can go over all financial figures. You’ll need to bring a cashier’s check payable to the title company for your expenses, so knowing the amount needed a day or so prior to closing will give you time to get to your bank.
Try to schedule your closing for the morning. This will give you a few extra hours to handle any last minute snags and still close the same day (all the documents would have to be changed if your closing got pushed to the next day). Also, try not to close on the last day of the month. Many other buyers will be closing on that day and you may not get the same service if you are one of the many on that day.
11. GO TO THE CLOSING AND RELAX. You’ve done your homework well. You’ve earned the peace of mind that comes from doing things right.
GO FOR IT!
You deserve the very best. Contact a full time professional agent or for a free consultation on how you can save big money on your home purchase.