How to buy a home

Looking for a new home is a very big but exciting process. There are many options on the market to choose from. This will give you a general idea about what you can expect during the home buying process. Never hesitate to ask questions! You are making a long term commitment to spend a large amount of money. Also, stay informed! Keeping in touch with your real estate agent will make this time feel less stressful.

 

How much can I afford?

Getting pre-approved is the first step to buying a house. Find a lender you trust and go over what you are willing to pay each month on a home loan. You may be approved for more than you feel comfortable with, but make sure to only go with an amount you feel you can afford. The lender will be a big part of deciding how much you will be able to spend on a new home. With all the information you give them, they will be able to tell you how much the bank is willing to loan you. The other expense you need to calculate into the cost of buying a home is the closing cost. This generally is around three percent of the selling price and typically paid for by the buyer. These costs can be negotiated between the buyer and seller, with the help of agents.

 

What kind of home are you looking for?

Don’t rush into anything if you don’t have to. Take your time to look around and ask yourself: what area do I want to live in? How many bedrooms and bathrooms do I want? Is a basement or garage important to me? A city lot or something on acreage? Also, look around at the different layouts in homes. What would suit you best for your lifestyle?

 

Benefits of using a real estate agent

Using a real estate agent is always a benefit to the buyer. Once you know how much you are pre-approved for, your real estate agent can assist you in finding something just right for you. A few of the things an agent can provide for you are: a professional opinion of a home, information about the area in which the home is located, and the true value of a home. A real estate agent’s job is to help people find homes to buy. Instead of you searching through many sites looking for a home, your agent has full access to the RMLS (Realtor Multiple Listing Services). Your criteria can be entered into a search database and all the homes that fit that profile will be able to be viewed. Remember, the real estate agent is always looking out for your best interests. Making your dream of owning a home become reality go as smooth as possible is their job.

 

Finding the right home

After letting your agent know what you are looking for, your agent will compile listings of homes for sale to show you. Many times the buyers will drive past the homes they are interested in and get a feel for the neighborhood and the house. Once you have decided which homes you would like to see again let your agent know. Appointments will be set up with sellers for the homes to be toured at your convenience. Most likely you will want to look at many homes before making your final decision.

 

Making an offer

Once you find the home that best fits your criteria, you will have your real estate agent write up an offer. An offer will include the price you are willing to pay for the home, any contingencies you may have, and a closing date. Contingencies may be things such as the inspections coming back good, the appraisal showing the proper value of the home, your ability to get the loan, and a clean title. To protect the buyer, there are typically 5-7 contingencies on an offer to. This will also be the time when you put down earnest money. Earnest money is usually between $1,000 and $5,000 and it tells the sellers you are serious about buying their home. This money is usually refundable or is applied to the purchase. Once everything is written up and signed, the offer will be submitted to the sellers for them to look over.

 

Getting an offer accepted

After the offer is received by the sellers, they will review it and decide if they want to accept, counter offer, or not accept it. The selling agent usually contacts your agent within a couple of days to let you know what the sellers have decided. If they accept the offer as-is the sale will move onto the next step of the process. If they counter offer it is time to negotiate. They may want to negotiate the selling price or they may want to change the contingencies on the offer. This is a great time to have an agent working for you to help negotiate terms between you and the seller that are agreeable to both the buyer and seller.

 

Setting up escrow

Once the offer is signed by both parties an escrow account is opened at a title company. The escrow agent is a neutral third party. Escrow will hold the earnest money, make sure a title check is done, and prepare the closing papers for signing. A title check will be done to make sure there are no liens or claims against the property. It is vital to have a clean title on the home at closing.

 

Appraisal

The next step is to get an appraisal done on the home/property. The appraiser goes to the home and looks at what it and the property includes, such as bedrooms, bathrooms, square footage, size of lot/acreage, ect. All this data is then put into a program which will allow the appraiser to find comparables to your home. The comparables are homes pending or sold in the last 6 months in your area that are of similar size. Once all the information is looked over you will get an appraisal back telling you what they believe the home/property to be worth.

 

Appraisal results

If the appraisal comes back showing the home/property to be worth more than the offered price that is a great! You and the seller have already agreed to the price and the lender will be satisfied to see the home is worth at least the loan amount. If the appraisal should come back showing the home to be worth less than the agreed offer that could be a setback for the buying process. The lender will not loan more than what something is worth. Therefore, you may need to see if the seller is willing to adjust their price accordingly or it might mean looking into a different home to buy.

 

Home inspection

A home inspection is a vital part of buying a home. A home inspection should always include checking for pests, dry rot, mold, mildew, hazardous materials, and the general condition of the home. Older homes, pre-1978, should also be checked for lead paint. This is also a good time to have the well and septic system checked if they pertain to the home being purchased. The buyer is responsible for paying for the inspection, which can cost $300-$500, and is not part of the closing costs.

 

Home inspection results

Once the home inspection is done the inspector will present the results to the buyer. If everything is in good condition and there are no problems found, the buying process will continue on to the next step. If there should be any concerns this will be something to visit about with your real estate agent to understand who should be responsible for any repairs or replacements on the home. Typically these are negotiable between the buyer and seller on who should fix or replace an item. If the problems are more than expected and would be costly, or cause you to lose interest in the home, this is usually one of the conditions on the offer for being able to back out of the sale. This would also be the time to consider a home warranty if you feel you would benefit from having one.

 

Closing

The closing will take place anywhere between 30-90 days, depending on how everything is moving along. Typically you can close within 30 days but there are certain exceptions. Once the buyer gets an okay from the lender, appraiser, home inspector, and all other inspectors that may pertain to a particular sale, the closing papers will be put together. You will be notified once everything is ready and you will make an appointment to sign closing papers with your escrow officer.

 

Who will be at the closing?

Generally at the closing the people present are the escrow agent, the buyers, the real estate agent, and the lender. This will give you the opportunity to ask any last minute questions you may have. You may also have a real estate lawyer present if you feel that is needed.

 

Documents signed at closing

At closing you will sign documents about the property and the financial agreement you have made with the lender. The escrow agent will also present you the title of the home which should be clean of any claims or liens. The escrow agent will have the sale recorded in the county records the following day.

 

Title Insurance

Title insurance is to protect the buyer. After the sale is final, if something is found that the title company missed, they are responsible to correct what they didn’t find. So if there is a lien on the property for $10,000 that was missed, they would be responsible to pay that to the lien holder.

 

Moving in

Once the sellers are moved out and both sides have signed the closing papers you will be able to move into your new home! If the sellers need the move out date to be delayed, it is sometimes arranged for them to rent back from the buyers for a couple days until they are ready. These terms are negotiated before closing to make sure everyone gets paid correctly. Congratulations, you have achieved the American Dream!

 

Disclosure:
This is a general outline of what you can expect when buying a home.  Every home sale is unique. It is always best to contact your agent if any questions should arise.

 

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