Your Essential Guide to Homeownership
The Buying Process
Buying a home is likely the largest purchase you will make in your lifetime. It can feel like an overwhelming process, but it doesn't have to be! When we initially meet, we will discuss your wants and needs, what is most important to you, and what things you are flexible on. We will discuss the buying process and make sure we are aligned with your goals, so we can achieve them, together!
This guide will provide you with a snapshot of the buying process - from searching and negotiating, to financing and closings, and everything between.
Find the Mortgage That Works for You!
Most people don't know that the right time to connect with a lender is prior to when you want to buy. Lenders look in-depth at your finances and will help you set expectations around the amount you will qualify to borrow.
You may be in a great position to borrow now, or you may need to improve your credit score, pay off debt and build an emergency fund, or save for a down payment. Having more knowledge ahead of time, will put you in the best position to buy when you're ready!
Although interest rates from top lenders, including major banks and mortgage companies, tend to be pretty similar, even a tenth of a percent in a fixed-rate loan makes a huge difference in the amount you'll pay over the life of the loan.
Getting multiple offers for a mortgage loan before you start, and finding the right lender, will not only help you find the best rate, but will also determine if you qualify for a number of government-sponsored programs geared for first-time buyers.
As a real estate professional, I can help you find the right lender and loan to make your dreams a reality.
Start Your Home Search
Once you're pre-approved for financing, the real fun begins! We will set up a custom home search that will target your specific wants and needs within your budget. How many bedrooms and bathrooms? How many square feet and what type of home? What towns are you considering?
Once we have all the specifics sorted out, we will set a custom search catered to your needs and begin looking at homes that fit your criteria. When new listings hit the market, they will go straight to your inbox! Viewing homes that meet your criteria allows you to begin comparing properties and thinking about what is truly most important to you in terms of must haves, and which things you're flexible on.
Be Ready to Make an Offer!
When you see a property you love, especially if it just hits the market, you will need to be ready to make a competitive offer, or you may miss it!
The buyer that makes the highest offer doesn't always get the home. In many cases, it’s the one that makes the first offer, and sometimes there are multiple offers on the same property!
If the seller is in a rush to sell, and the first offer is a good one, it’s quite possible the seller may simply accept the first one. In other instances, the seller may have multiple offers to choose from and will consider not just price, but also the buyer's approval for financing and contingencies, among other factors.
In order to be in a position to make the best offer you can, you MUST get your finances in order ahead of time. Before you start making offers, make sure to have your pre-approved loan by the bank, or the ability to quickly prove you have sufficient cash funds to purchase without financing.
What happens next?!
Once your offer is accepted by the home-seller, the entire closing process can take anywhere from 30 to 60 days (or less for cash purchases). This gives you plenty of time to tackle closing items such as a home inspection, finalizing lending, appraisal, and title search. I will be there to guide you throughout each step!
Let's break it down!
Home Inspection and Loan Application:
Immediately upon a seller accepting your offer, a contingency period begins. During this time is typically a home inspection, where a professional checks the entire home for any costly or unexpected issues. Once the inspection is done, there is time to renegotiate with the home-seller as to how best correct any items noted on the inspection report. The inspection is paid by the buyer and is due at the time of the inspection. Depending on what type of inspection is important to you determines the cost and can range from a few hundred (most typical) to a few thousand dollars, and is paid by the buyer at the time of inspection.
Earnest Money
Within the first few days after your offer is accepted, you will need to prove you've applied for a loan with your lender, and provide an earnest money check. Earnest money is written into your offer to show the seller that you are a serious buyer. Typically the amount is 1% to 3% of the purchase price. It is held in escrow to be applied to your down payment at closing.
Appraisal
After you've applied for your loan, the lender will work with you directly, and they will begin the appraisal process. During the appraisal, a licensed appraiser visits the home and compares it to other homes in the area that have recently sold. This is required by the lender to ensure the home is worth the amount you are borrowing. The appraisal is paid by the borrower upfront.
Title Search
The next step is a title search which is done by a title company that handles the closing. When you purchase a home, you are actually purchasing the home-seller's title to the home, which legally allows them the right to own and use the property. A title search protects you and the lender, and is done to ensure you are receiving a clear title to the home.
Closing
When all of this is done, you are ready to close! Closing means the title to the home is being legally transferred from the seller to the buyer and all documents are finalized. This is usually done during a meeting, run by the closing officer from the title company. They handle the singing of all documents, funds that need to be disbursed, and you will be officially given the keys to your new home!
What Costs to Expect
Buying a home is an exciting time, but there are more costs to prepare for in the process than just the purchase price of the home. Keep in mind this list is not inclusive of every cost you could come across, but includes the most common.
Earnest Money
Earnest money is written into your offer to show the seller that you are a serious buyer. Typically the amount is 1% to 3% of the purchase price. It is held in escrow to be applied to your down payment at closing. You will need to provide these funds within the first few days after going under contract.
Inspections
The inspection is paid by the buyer and is due at the time of the inspection. Depending on what type of inspection is important to you, determines the cost and can range from a few hundred (most typical) to a few thousand dollars.
Appraisal
During the appraisal, a licensed appraiser visits the home and compares it to other homes in the area that have recently sold. This is required by the lender to ensure the home is worth the amount you are borrowing. Prices for appraisals vary but are typically around $600 and are paid upfront by the buyer.
Down Payment
Your down payment is based on a percentage of your purchase price and depending on the loan you qualify for, you may be required to put down as little as 0%. You lender will go over the programs that best meet your needs and what your required down payment will be. The down payment is paid on the day of closing.
Closing Costs
These costs are in addition to your down payment and vary depending on the loan program and purchase price, along with other fees such as title search and insurance, taxes, lender fees, and recording fees among others. Typically closing costs are approximately 3% of the mortgage amount on average. In some instances sellers may contribute to closing costs, but they are typically paid by the buyer.
How Can I Find a Deal or Save Money?
Look for Properties That Have Been Sitting on the Market
We can search for properties that have been listed on the market for awhile and have not sold. In some instances these homeowners may be willing to sell their home for less.
Shop During the Slow Season
Most home buying and selling activities take place during late spring and summer. As a result of that seasonal increase of activity, home prices go up. If you're willing to brave the cold and wait until winter, you may be able to capitalize on some amazing deals. People who are willing to list their homes in the middle of the holidays are typically very motivated to sell. This, of course, could lead to amazing deals for you.
On the other hand, there’s a downside to shopping for homes during winter: you’ll have fewer homes to choose from and fewer recently sold comparable properties to help you justify the price.
Look into Bank-Foreclosed and Tax Delinquent Properties
Banks are not in the business of homeownership. They are in the lending business. Any time a bank ends up taking possession of a home by means of a foreclosure, they want to sell it as quickly as possible. However, the foreclosure process is still a lengthy one which could drag on for years. This usually translates into banks selling homes at a substantial discount.
When homeowners do not pay their property taxes, the county will take possession of the home via a tax foreclosure. Then, the house is auctioned off to recuperate those missing taxes (from which the homeowners would get $0 in return). Tax delinquent lists are part of the public record. You can have access to your local list by asking for it in your county treasurer’s office, and paying a fee to obtain it. This list is filled with homeowners that have a HUGE motivation to sell their property, especially if they haven’t paid their property taxes in years. If they’re only a year or two away from losing their home to a tax foreclosure, they could be willing to sell their home or property for pennies on the dollar.
Bear in mind, not every foreclosed or tax-delinquent property is an amazing deal. Many of these homes are in serious disrepair and would require you to have plenty of capital to fix them up. If you’re not careful, your bank-foreclosed or tax delinquent property “deal” could turn into a nightmare scenario.
On the other hand, if you're willing to spend the time and resources needed to sift through this home inventory, you’re sure to find some valuable gems!
Look for New and Pre-Construction Developments
If fixer-uppers aren't for you, and you're flexible on location, another possibility is new and pre-construction developments.
There are times when developers looking to finance the next phase of their development are willing to offer homes and/or condos at a significant discount.
Of course, the catch is that you need to have access to pre-construction offers, and you need to have enough cash to make your down payments. However, there is usually negotiation room on pre-construction from everything in terms of price and deposit structure to upgrades and closing costs.
Ask the Seller to Pay Closing Costs
Although the buyer is typically expected to pay for a number of closing fees (especially those related to origination of the loan), it's not written in stone. Like pretty much everything in real estate, closing costs are negotiable. In some instances, it can be negotiated for sellers to contribute to, or pay for closing costs.
Work with an Excellent Realtor!
With so many variables to consider, buying and selling a home can feel like an overwhelming process, but it doesn't have to be! Working with a real estate professional that understands todays fast paced and high tech market will help guide you efficiently through financing, negotiating, closing, and everything between. When you choose me as your realtor, your real estate goals become my goals. I work tirelessly to help you achieve them while providing you with a great experience along the way.
As a home buyer, it is within your personal best interest to hire an excellent realtor, and it won't cost you anything! The seller pays commission to both the buyer's and seller's agent. Many people mistakenly think they should call the listing agent directly if they're interested in buying, but remember who the listing agent is looking out for... the seller! That means who is looking out for YOU? When you hire me as your realtor I look out for and negotiate for your best interest, helping you to get a much better price than you could on your own.
Additionally, I bring a wealth of expertise and knowledge to find you the right home at the right price, recognize toxic deals, and help you avoid common legal pitfalls in real estate which you could stumble into on your own.
I genuinely value every client, of every budget and look forward to working together soon!