Buying a home can be a daunting experience, but it doesn’t have to be that way. Having the right professionals on your side and being prepared can save you a lot of money and headaches. Your home purchase should be exciting and fun!
There are several steps involved in the home purchase. Understanding and preparing for each step is very important in having a stress-free and successful experience. Whether your dream home includes a big yard, stainless steel appliances, finished basement, or great schools, it takes planning to make your dream home purchase come true.
1)FIND A REAL ESTATE AGENT. There are so many agents out there. How do you pick the right one for you? This is one of the most important steps in the process. Think of your real estate agent as the quarterback. The quarterback is a key player that coordinates the offense. The professional real estate agent should be the one coordinating all the parties involved in your purchase. Your real estate agent should be making sure that the closing attorney, lender, and seller are all performing their duties and obligations per the contract. Coordinating all these individuals is key in making sure that the deadlines are met and you close on time.
2) GET LENDER PRE-APPROVAL. I can’t stress this part enough. Many buyers think that applying for a loan and getting a pre-qualification letter is all they need to do. There is a big difference between making an offer with a pre-qualification letter or a pre-approval letter. Any lender can provide a quick pre-qualification letter with an application that you place online. A pre-approval letter takes this process a step further. In order to receive the pre-approval, you will need to provide verification of the information that you gave in the application. Be prepared to supply your loan representative with pay stubs, tax returns and W-2s from the previous two years, as well as documents that show additional sources of income.
FIVE STAR TIP: Make sure that you decide on a lender BEFORE you look at houses. I can’t stress this enough. There are so many things that occur once you go under contract. The last thing you want to do is try to figure out which lender you want to use in the middle of this process. This step alone will save you from a lot of trouble.
Shop around! Getting quotes from different lenders gives you the peace of mind that you are getting a good deal on your mortgage. However, be very careful choosing a lender. The number one source of most of the delays and issues stem from a bad lender. The big banks and credit unions are notorious for delays. That is great that you have been banking with them for years and that you have all your accounts with them, but I guarantee that they don’t have the same loyalty to you. Having a professional real estate agent that has experienced a vast list of lenders should be able to guide you in choosing a lender that is right for your needs. For years I have experienced different lenders and have weeded out the bad ones. Click the following link for a list of preferred lenders that live up to the test http://mendoza-realty.com/preferred-vendors/.
3) FIND A HOUSE. You have completed two big steps in the process! Now it’s time for the fun part. Touring houses is an exciting time. You are finally physically (not just pictures on the internet) seeing your possible new home. Seeing the beautiful granite countertops, spacious gourmet kitchen, and beautifully kept manicured yard can be exciting, but also distracting. Having a real estate agent that knows construction is key in this process. Your agent should point out all the defects that they can see so you can avoid having to deal with falling in love with a home that has issues. Sure, your home inspector will find these issues. But, wouldn’t it be nice to not have to deal with negotiations and pay earnest money and the inspector fee on a house that you wouldn’t buy if you knew what was going on with it? A good agent should be able to tell you how old the HVAC system and the hot water heater are, the different kinds of roofs, the efficiency of windows, and any defects such as polybutylene plumbing, LP siding, and masonite siding. They should also discuss what possible re-sale value the house has when you sell it sometime in the future. Your agent should not just be there to open doors and show you all the beautiful cosmetic features!
4) MAKE AN OFFER. There is a chance that the list price might not be at market value. A good agent would provide you a comparative market analysis to see what the true value of the home is. Based on those numbers, you are now ready to make the offer. Making an offer is not just negotiating the price. There are several areas of negotiations such as the closing date (normally 30 days out), earnest money, closing attorney, closing costs, home warranty, termite bond, refrigerator, septic tank clearance letter (this has literally saved my clients thousands of dollars), due diligence time frame, financing contingency, appraisal contingency and more.
The seller is required to provide you with disclosures. There are two disclosures that are important for you to review. These are the “Seller’s Property Disclosure” and the “Community Association Disclosure”. The Seller’s Property Disclosure(SPD) should have information such as any defects and/or issues with the home. Past issues and what they did to repair them. It will also have the age of the roof, hvac system, and hot water heater. Another key part to the SPD is a list of items that will be staying with the home. It is important to know if that $3000 stainless steel refrigerator is staying or do you need to negotiate it into the offer. The Community Association Disclosure(CAD) will have information about the Home Owners Association fee and what that fee covers. It also has information about any special assessments that might be coming in the near future. Wouldn’t you want to know if the HOA is going to be re-paving the parking lot and each owner will have to pay $500 or more for that repair?
Keep in mind that the seller will also want the pre-approval letter along with your offer to see which lender you are using. That is another reason why using a lender that is known in the market for delays and issues plays a key role in your offer. There are many things to consider when making an offer. A good agent should be able to walk you through all of your choices and guide you through each step.
5) UNDER CONTRACT AND DUE DILIGENCE. Once you are under contract, the first thing you need to do is deliver the earnest money to your agent. Earnest Money is usually 1% of the purchase price. Your agent should have the right language in the contract to protect you from losing your earnest money. All contracts should be written with a due diligence period, financing contingency, and appraisal contingency to protect your earnest money.
The due diligence period is usually between 7 to 10 days. You are able to back-out of the contract for ANY reason you want within this time period and receive a full refund of your earnest money. During this period, you will have the opportunity to have a professional inspector inspect the home. Then, you would come up with a list of things that you would want the seller to repair. The seller will normally repair defects with the home, but usually not as often the cosmetic items. This is usually the time to negotiate repairs, but not re-negotiate the price of the home or closing costs. However, there are some rare instances where re-negotiating the price is the right thing to do if the seller is unwilling to repair high ticket items.
6) FINAL WALK THROUGH. Before the closing, you will want to do a final walk through of the home. This is the time to make sure that the agreed upon repairs were completed correctly, that the items that were supposed to stay with the home are still there (i.e. refrigerator), that all the personal belongings are moved from the home, and to make sure that there are no new issues (i.e. no new water leaks or a tree that has fallen on the house). For example, I’ve experienced a whole a/c unit outside the home was stolen. If the buyer did not see that and signed the closing docs, they would have had to replace the unit themselves.
7) CLOSING DAY!!! Finally…the moment you have been waiting for! There are a few things that need to occur before the closing. First, the lender is required to send you the Closing Disclosure (CD) 3 business days prior to closing. The CD is the document that details all the financials for your transaction. It will provide you information such as the interest rate, down payment amount, purchase price, lender fees, attorney fees, and the funds that are needed for closing. Second, you are required to wire these funds to the closing attorney’s bank- it is suggested that you do so the day prior to closing at the latest. Be very careful of wire fraud. Before you wire funds to the closing attorney, make sure you call their office to confirm the wire instructions that were emailed to you. Third, bring two forms of identification to the closing. A driver’s license and something else that has your name on it such as a credit card.
Closings typically last one to two hours. Once you have signed all the documents, the attorney will fax over to the lender the funding docs. The lender exams the docs for accuracy and then issues the funding approval. Once the lender gives funding approval, you are good to go! Congratulations! You are a new home owner!