A Guide to Buying a Home
Like finding the right house, selecting a REALTOR® you can trust and comfortably work with is paramount. Just as you wouldn’t be casual in the selection of your doctor or your attorney, you shouldn’t take the selection of your REALTOR® lightly. Our agents at Home Living Tree will show you step by step the home buying process as well as show you specifically what we will do in helping you find the right home or property.
The Buying Process
One of the keys to making the homebuying process easier and more understandable is planning. In doing so, you’ll be able to anticipate requests from lenders, escrow and a host of other professionals. Furthermore, planning will help you discover valuable shortcuts in the homebuying process.
Step 1: Hire a Realtor
Buying and selling real estate is a complex matter. At first it may be looking online you could quickly find the right home at the right price. In this maze of forms, financing, inspections, marketing, pricing and negotiating, it makes sense to work with a professional, like Home Living Tree agents who know the community and much more. Our professionals are the local Realtor who serve your area.
Step 2: Get Loan Pre-approval
“Preapproval” means you have met with a loan officer, your credit files have been reviewed and the loan officer believes you can readily qualify for a given loan amount with one or more specific mortgage programs. Based on this information, the lender will provide a preapproval letter, which shows your borrowing power. You can visit as many lenders as you like and get several preapprovals, but keep in mind that each one carries with it a new credit check, which will show up on future credit reports.
Although not a final loan commitment, the preapproval letter will be shown to listing brokers when bidding on a home. It demonstrates your financial strength and shows that you have the ability to go through with a purchase. This information is important to owners since they do not want to accept an offer that is likely to fail because financing cannot be obtained.
Real estate financing is available from numerous sources, including your local bank, credit union or mortgage companies that work with our Realtors. Our agents can also suggest one or more lenders with a history of offering competitive programs and delivering promised rates and terms.
Step 3: Look at Homes
A home is more than just a collection of bedrooms and bathrooms. Several properties — each with four bedrooms, three baths, and the same price — may well represent radically different designs, commuting distances, lot sizes, tax costs, interior dimensions, and exterior finishes.
Each of us is different and so it’s important to list the features and benefits you want in a home. Consider such things as pricing, location, size, amenities (extras such as a pool or extra-large kitchen) and design (one floor or two, colonial or modern, etc.).
Next, it’s important to consider your priorities. If you can’t get a home at your price with all the features you want, then what features are most important? For instance, would you trade fewer bedrooms for a larger kitchen? A longer commute for a bigger lot and lower cost?
Lastly, consider your needs in several years. If you’ll need a larger home, maybe now is the time to buy a bigger house rather than moving or expanding in the future.
Step 4: Choose a Home
As a buyer, here’s what actually happens. A home has been placed on the market with an asking price as well as other terms. At this point, you have three choices: accept the seller’s price, create your own offer, or not make an offer. Then the seller may accept, reject or make a counter-offer.
No aspect of the home buying process is more complex, personal or variable than bargaining between buyers and sellers. This is the point where the value of an experienced Home Living Tree Realtor is clearly evident because he or she knows the community, has seen numerous homes for sale, knows local values and has spent years negotiating realty transactions.
Step 5: Make an Offer
While much attention is spent on offering prices, a proposal to buy includes both the price and terms. In some cases, terms can represent thousands of dollars in additional value for buyers — or additional costs. Terms are extremely important and should be carefully reviewed.
How much? You sometimes hear that the amount of your offer should be x percent below the seller’s asking price or y percent less than you’re really willing to pay. In practice, the offer depends on the basic laws of supply and demand: If many buyers are competing for homes, then sellers will likely get full-price offers and sometimes even more. If demand is weak, then offers below the asking price may be in order.
How do you make an offer? In a typical situation, you will complete an offer that your Realtor will present to the owner and the owner’s agent. The owner, in turn, may accept the offer, reject it or make a counter-offer.
Because counter-offers are common (any change in an offer can be considered a “counter-offer”), it’s important for buyers to remain in close contact with their agent during the negotiation process so that any proposed changes can be quickly reviewed.
Step 6: Secure Funding
Often the cost of real estate financing is routinely greater than the original purchase price of a home (after including interest and closing costs). Because financing is so important, buyers should have as much information as possible regarding mortgage options and costs.
There are thousands of loans available out there from a variety of lenders, but in general, the mortgage you choose will likely be determined by at least several key factors:
How much down payment?
How’s your credit?
Are you a first-time buyer?
Most common loans are conventional loan(20% down payment at current interest rate), FHA(currently 3.5% down with .5% higher interest) or VA(Ventrans Affair loan; must be active or non-active military)
To obtain a loan you must complete a written loan application and provide supporting documentation. Specific documents include recent pay stubs, rental checks and tax returns for the past two or three years if you are self-employed. During the prequalification procedure, the loan officer will describe the type of paperwork required.
Step 7: Home Inspection
How many inspections? A number of inspections are common in residential realty transactions. They include checks for termites, surveys to determine boundaries, appraisals to determine value for lenders, title reviews and structural inspections. A certified home inspector to conduct a general inspection of your home is highly recommended.
Step 8: Get Insurance
No one would drive a car without insurance, so it figures that no homeowner should be without insurance. The essential idea behind various forms of real estate insurance is to protect owners in the event of catastrophe. If something goes wrong, insurance can be the bargain of a lifetime.
There are various forms of insurance associated with home ownership, including these major types:
Title insurance. Purchased with a one-time fee at closing, title insurance protects owners in the event that title to the property is found to be invalid.
Homeowners’ insurance. Homeowners’ insurance provides fire, theft and liability coverage.
Flood insurance. Generally required in high-risk flood-prone areas, this insurance is issued by the federal government and provides as much as $250,000 in coverage for a single-family home plus $100,000 for contents.
Earthquake Insurance. Earthquake insurance is optional in California but since we live in earthquake country, it may be something serious to look into.
Home warranties. Home warranties are always a great bet and may be requested to be part of your property purchase or may be added at a later date. Home warranties also called home protection plans are typically one-year service agreements purchased by sellers. In the event of a covered defect or breakdown, the warranty firm will step in and make the repair or cover its cost. The homeowner will be responsible for a small deductible, usually 50 bucks per incident.
Step 9: Closing (Escrow)
What to expect. Escrow is a brief process where all of the necessary paperwork needed to complete the transaction is signed. Closing is typically held in an office setting, sometimes with both buyer and seller at the same table, sometimes with each party completing their papers separately but increasingly escrow has become computerized and automated. In many cases, buyers and sellers don’t need to attend a specific event; signed paperwork can be sent to the closing agent via overnight delivery.
What you need to do. Before closing, buyers typically have a final opportunity to walk through the property to assure that its condition has not materially changed since the sale agreement was signed. At closing itself, all papers have been prepared by closing agents, title companies, lenders and escrow. This paperwork reflects the sale agreement and allows all parties to the transaction to verify their interests. For instance, buyers get the title to the property, lenders have their loans recorded in the public records and state governments collect their transfer taxes
Step 10: Moving In (Congratulations!!)
Moving in. It is generally understood that sellers will leave homes “broom sweep clean” when moving out. This expression does not mean “vacuumed” or “spotless.” Broom clean makes sense because it means the house is ready to be painted and cleaned.
Your home, your money. For most owners a home is the largest single asset they hold, so it makes sense to protect that asset. Many owners make a photo or video record of the home and their possessions for insurance purposes and then keep the records in a safety deposit box. Your insurance provider can recommend what to photograph and how to secure it. You want to maintain fire, theft and liability insurance. As the value of your property increases such coverage should also rise. Again, speak with your insurance professional for details.
Lastly, enjoy your home. Owning real estate involves contracts, loans, and taxes, but ultimately what’s most important is that homeownership should be a wonderful experience. Enjoy!
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