Purchasing a property is most likely the biggest financial decision you will ever make. Whether this is your first purchase or you are an experienced buyer, this decision must be made carefully.
Why Do You Want To Buy?
Tired of making rent payments? Is your current home too small or ready to upgrade? Need a pool and a larger yard? Want to build wealth thru investment properties? Looking to move to a different area or lifestyle change? There is a lot to think about, but knowing why you want to buy makes searching a whole lot easier.
Whether you are a first-time home buyer or you have purchased before, the process can seem stressful and daunting. To make it a little easier, below are the basic steps that encompass purchasing a home.
Step #1 – Get pre-approved with the lender of your choice! Pre-approval ensures you are comfortable with your monthly payment and price range. You must have a pre-approval letter in order to submit an offer on any property. Shop around! If you don’t know where to start your realtor or friends will have great suggestions. The lender should return your calls promptly, guide you on what can and cannot be done during the process and provide you with an estimate of costs and fees associated with your loan.
Step #2 – Choose your real estate agent! You will work exclusively with ONE real estate agent that can show you ANY home on the market! This agent knows you, your personal needs and criteria for your home search. Remember, when you call the agent listed on the sign, they work for the SELLER. Your BUYER’S agent works for YOU!
Step #3 – House hunt! If you are unfamiliar with the area in which you are considering, use the internet to your advantage. Check school ratings if that is important to you, crime reports, drive the neighborhoods at night and on the weekends, ask your realtor what their experience or knowledge is.
Upon finding the home of your dreams, your agent will run a market analysis for the homes in that neighborhood and advise you on the offer you will make based on the sales of homes in your particular area. Once the Seller accepts the offer and everyone has signed off on it, you now are in an executed legally binding CONTRACT. Congratulations!
Your agent will ask you for Earnest Money to be deposited at the Title Company which is your “good faith” that you will be purchasing the home. Earnest money is typically 1% of the sales price. This Earnest Money is applied toward your down payment and/or closing costs. Earnest Money is made payable to the Title Company listed in your Contract. The Title Company will then “open title” and begin obtaining the Title Policy.
Your agent will also ask you for an Option Fee check. You have an option period in your contract (normally 7-10 days) in which you have ALL of your inspections completed (home, pool, septic, well, termite, etc.). The Buyer pays the Seller for the option period and this option fee is NON-REFUNDABLE. The option fee check is made payable to the Seller.
Step #4 – Inspections are crucial! Once all inspections are completed, you negotiate any repairs with the Seller. If negotiations are NOT successful and the contract is terminated, the Seller keeps this option fee but the Earnest Money is refunded to the Buyer. If negotiations ARE successful and the Buyer proceeds with the purchase of the home, the option fee and earnest money are applied toward the home. All inspection fees are BUYER expenses and will be paid out of pocket by the Buyer.
Step #5 – Start searching for homeowners insurance and getting quotes. This could make a big difference in your monthly payment! Your Lender will need this information.
Step #6 – The lender will order the appraisal of the home. The appraisal must come back with a value of the sales price or it will have to be negotiated with the Seller to reduce the price or the Buyer pays the difference. If the home does not appraise for the sales price and no agreement is made between the Buyer and the Seller, the Buyer may terminate the contract and receive their Earnest Money back. The appraisal is a BUYER’s expense. Your Lender may request you pay it out of pocket or they may put it on the Closing Statement to be paid when the home is closed.
NOTE – It is very important to provide the Lender any and all information requested as quickly as possible. Without the appropriate information, the Lender is not able to proceed with your file and the closing could be delayed.
Step #7 – If not already provided by the Seller, a Survey will need to be done on the property to ensure you know the boundaries of the property you are purchasing! Most title companies handle ordering the Survey. The survey is typically a buyers expense but can be negotiated in the contract.
Step #8 – The Lender is doing all the work to get the file ready to submit to underwriting and we are waiting on those THREE very special words – CLEAR TO CLOSE! This means the Lender has all the documentation they need and we have a green light to set the closing of your new home!
Step #9 – The Home warranty is negotiated in the contract. If you would like a home warranty, now is the time to review those and choose the one you want. Advise your agent and they will provide the information to the Title Company. A google search for Home Warranty companies will yield sources to consider. Ask your agent if you are not having any luck.
Step #10 – The Lender prepares the Closing Disclosure (previously known as HUD) which is a line by line detailed itemization of all fees being paid for by the Seller and Buyer. You will receive a copy 3 days before closing and you MUST acknowledge receipt of it. We cannot close with less than 3 days notice to you. It will advise you of the amount of money you need to bring to closing. ALL FUNDS BROUGHT TO CLOSING MUST BE A CERTIFIED CHECK MADE PAYABLE TO THE TITLE COMPANY or sent via Wire Transfer! Verify wiring instructions. Wire fraud can be an issue so speak with your Realtor if you receive any emails to change wiring instructions or calls to confirm your information.
Step #11 – It’s closing day! A walk through of the home is scheduled prior to closing to ensure all agreed repairs were done and that the home is in clean and presentable condition. The closing will take place at the Title Company! The address of the Title Company is at the top of Page 2 on your contract. You will need to bring that cashier’s check and your driver’s license to the closing. Closings normally take about an hour – there is a lot of paperwork!
Step #12 – Funding takes place once all documentation is signed and reviewed by the Lender and a funding number has been issued. This can take 20 minutes or a few hours – the Buyer will not be allowed to have keys to the home until the transaction has FUNDED.
Special Notes: Coordinating movers, children, pets, etc can be very challenging. Often closing dates are moved because of various reasons-mostly because of the lending aspect of the sale. We try very hard to keep dates firm, however, it is not always possible. Please keep that in mind when scheduling appointments.
If you are selling another home, we can attempt a “double close”. This type of closing can be tricky and will almost always causes stress so take that into consideration when making decisions.