A Step By Step Look at Home Buying
Some real estate laws and customs differ depending on where you live, but there are many home buying steps that are standard, even though they might not be accomplished in the same order in every location. Here are the 11 steps to buying a home:
Step 1 – Get Your Credit/Finances in Order
Your credit reports is a primary factor in determining what interest rate you will receive and how much the banks are willing to loan you toward the purchase of the property, so make sure you check it and ensure there are no issues before starting the property search process Know your financial history before you apply for a mortgage, as errors on credit reports are common and often require a lot of time to clear up.
Step 2 – Get Familiar with the Mortgage Industry
Have at least a bit of background about the loan process before you talk to a lender (if you do not already have it, find some one who does or consult with your realtor who can assist you in the process). Find a ender that you are comfortable with and that fits your needs.
Step 3 – Get Pre-Approved for a Mortgage
Once your credit/finances are in check, apply for a pre-approved mortgage to establish how much house you can afford? It also helps if you are involved in a bidding war for a property, the potential buyer that has already been pre-approved will get preferential treatment from the seller.
Step 4 – Determine Your Wants and Needs
Grab a piece of paper and divide it into three columns. If you’ll have a co-owner, have that person make a list too, but don’t share ideas just yet.
Column 1 – List Must-Have Features:
- If the house must be located in a specific neighborhood or school district.
- If the house must have 3 bedrooms, a 2 car garage, a large kitchen, a view.
- If there must be no restrictions against a home-based business.
- If the home must be one level, with few or no steps.
- List every feature you feel is a must.
Column 2 – List Features You Would Like:
- A basement or a deck.
- Whirlpool tubs, walk-in closets.
- A certain type of architecture.
- Gas heat.
- Central air conditioning.
- List all features that are important to you–but that you might be flexible about.
Column 3, List Features You Do NOT Want:
- A home located next to a highway or in a congested area.
- Certain types of architecture.
- Homes that need a great deal of work.
- List all features you absolutely cannot accept.
Review your list. If your co-owner made a list, compare them to see if your priorities match. If they don’t, you’ll need to compromise, revising your lists so that both of you are happy.
Making a list is a good exercise because it forces you to think about your wants and needs, but I can almost guarantee you that the list will change and evolve when you actually begin to look at houses. Even home buyers with an unlimited budget rarely find the “perfect” home.
Step 5 – Select a Qualified Real Estate Agents
Basically, there are many agents, all adhere to the professional standards or code of ethics established by the National Association of Realtors, but here are some reasons of what you should look for in an agent and why you should do business with me
- Find an agent that you feel comfortable with in their personality, professionalism and ability to serve or assist you in your home buying/selling process – like me!
- Find an agent who has a good website that provides you with ample educational resources, information about the area, offers me services and has a good MLS search and information on listings I am interested in
- Find an agent who will offer you prompt professional service
- Find an agent who is knowledgeable and will help guide you through the real estate process
- Ask me for referrals. Don’t do business with me because I have a nice website, let my previous customers tell you how I serviced them
- Make an appointment and interview me, ask me about my marketing tactics, placement in MLS, services offered, commission rate, etc.
- Get a feel for my knowledge and experience of the industry and the area and more
Step 6 – Start Searching for a Home
As a Realtor, I have many tools at my disposal to help you through the process. I can help you by searching the multiple listing service (MLS) system to find listing that match your desired criteria, providing you with Comparative Market Analysis (CMA) reports, lend my knowledge of the area, school systems and more.
You can also pick up House For Sale magazines and read classified ads in your local newspapers, surf the Internet for homes, we plan afternoon drives to preview neighborhoods.
Hint: You can use my website to search and find and then I can show you any property in the area!
Start looking for two types of real estate:
- Houses that seem to match the one you’d like to buy
- Houses that are similar to your current home.
Step 7 – Handle Pre-Offer Tasks
Deciding whether or not you want to buy a house involves a look at its structure and its features, but there are many other topics that are every bit as important to your purchase.
Step 8 – Make an Offer
Here are some tips that can help you get the best deal when it’s time to make an offer on a home. No matter what your strategy is, you should have a very good idea of the home’s market value before you make an offer.
- Lowballing it: Be realistic, some seller’s take a lowball offer as a personal insult and may not be as anxious to deal with you on your next offer. That’s fine if low is all you’ll go, or if the property is truly overpriced, but it can create problems with future negotiations.
- Being generous: Come in too high and you may not find the seller’s low point.
- Helpful Advice from your Agent: One area I can help you is to provide you with enough information and advice to assist you in determining the best price to offer. I can run comparables for you, and will be involved in offer strategies.
- Finding Sales Information – Courthouse/Local Tax Collector Website: Ask the staff to explain how to decipher deeds or other records that indicate sales prices, find out the selling history of properties in the area and often get sketches and facts about a home’s structural components.
- Asking prices: Advertising gives you a feel for average asking prices, but your focus should be on sales prices. You’ll find them recorded as explained above or on multiple listing recaps of sold properties.
- Should You Have an Appraisal? Order an appraisal before making the offer, but make sure the results will not be shared with others (and keep in mind that opinions from different appraisers can vary).
- What about tax values? Tax valuations are not a good measure of a property’s market value. Your community might have a general guideline, such as tax value = 80% of market value, but the figures are not usually reliable. Ask your local tax assessor for details about your specific area. Take a look at a home’s tax value, but never assume it matches the market value of the property.
Other factors that affect price
- How long has the house been on the market? If only a short time the sellers might not too motivated.
- How does the house compare with others for sale in the same neighborhood?
- Is the house in need of repairs or massive updates? Updating items such as insulated windows, plumbing and electrical systems, kitchens, and baths can be costly.
- How much time is left in the roof?
- What about the neighborhood, do you foresee home values climbing, staying the same, or possibly taking a downturn?
Analyze each home’s condition and compare it to others on the market, but your final offer will likely involve a good deal of gut instinct. Is it the house for you? If you’ve been searching for a home for awhile, you will probably know the answer to that question the minute you walk in the door.
Step 9 – Home Inspections and Other Tests
In some states, home inspections are accomplished before the final purchase contract is signed. In other states, inspections take place after an offer is finalized. No matter when you do them, it’s critical to decide which inspections and tests you want to perform.
Talk with your real estate agent or other advisor to find out when inspections should be handled and if additional types of testing are important for your specific area.
Step 10 – Avoiding and Correcting Last Minute Problems
As your closing date nears, everyone involved in your real estate transaction should check its progress on a daily basis, because staying on top of things means you’ll know immediately if there’s a problem that must be dealt with. Here’s a bit of information that focuses on a few common problems that home buyers must deal with before they close on a house.
Step 11 – You’re on the Way to Closing
Most of your home buying problems are behind you now and you’re on your way to closing, also called settlement, the event that transfers ownership of the property to you, here the realtor and the closing agent (can be broker, lawyer or closing specialist) will help guide you to your new home.
1. Don’t Make a Major Purchase
If you are depending on a mortgage to move in, don’t make any major purchases until after the closing on the home (fight the urge to get a new car to put in your new driveway). An increase in your debt to income ratio reduces the amount of monthly income available for your mortgage payment. Using cash to purchase the car could also create a problem, since banks consider cash reserves when approving your mortgage. If you must make a major purchase before closing, talk to your loan officer before you do it.
2. Don’t Change Jobs Unless It’s Necessary
Lenders like to see a consistent job history. They aren’t usually as nervous if you change jobs within the same field, but it’s better to stay put until the keys to the house are in your hand.
3. Don’t Let Your Emotions Take Over
Be realistic. No home is perfect, especially older homes. If the seller refuses to do a small repair, don’t let it kill the deal on a home you truly love, realize It’s not unusual for new owners to take care of some repairs themselves. Keep a cool head during the entire home buying process, especially during and after an inspection.
On the other hand, don’t fall so much in love with the house that you’ll buy it no matter what needs to be done–unless you’re absolutely sure you can handle it emotionally and financially. Decide what type of repairs you can realistically tackle, then stick with the decision.
5. Don’t Forget to Switch Utilities
That sounds simple, but you’d be surprised how many people forget to apply for utility service at their new home. Call the utility companies as soon as you have a contract. Find out how many days lead time they need to switch the service, then get back with them when you have a firm closing date.
Don’t forget to discontinue services at your old home.
6. Line Up Your Hazard Insurance
A no-brainer, right? Acquire hazard insurance as early as possible, as it’s another often-forgotten task that buyers scramble to take care of at the last minute. Lenders will ask to see an insurance binder showing you have coverage at the closing.
In some locations, additional types of insurance coverage might be necessary. Talk to your lender about insurance requirements well before the closing date.
7. Don’t Become Best Friends with the Seller
While it’s great to be friendly, but don’t get into too many long discussions with the sellers, because it could cloud your judgments.
Remember, this is their home. A casual statement about “ripping up that ugly carpet” might be enough to keep the seller from negotiating with you about repairs or other issues that crop up.
8. Don’t Panic if the Appraisal Comes in Low
At least not at first. There are some things you (and your agent) can do to correct the problem.
9. Don’t Go It Alone
As your agent, it’s my duty to track many of the day to day details that involve the lender, the seller, or the seller’s agent.
10. Don’t Ignore Lender Requirements
Know what is expected of you and take care of it. For instance, a Certificate of Eligibility is required to move forward on a VA loan. That’s something you must handle yourself. Answer lender questions and provide required paperwork as quickly as possible–your closing depends on it.
Even for experienced home buyers, it can be a confusing process, but can be especially intimidating for the 1st Time Home Buyer, so here are some tips to help guide you through the process
Get Prepped in Home Buying Basics
Before you begin, get educated about the home buying customs where you live. Relatives or friends who live in another state might have some good general advice for you, but chances are the process is very different in their area, so avoid the mistake of relying solely on their advice to make important decisions.
So How Do You Learn the Basics?
Talk to a real estate agent for advice about the typical home buying scenario. This does not mean you have to sign an agreement for the agent to represent you, but it is a good opportunity for you to gain some knowledge off of an expert who deals with these transactions on a continuous basis and allows you to get a feel for me as your potential agent when you are ready to make that decision.
You can also talk to a bank loan officer or mortgage broker, they look at home buying from a different perspective, but can usually give you a basic overview of the process.
Home Buying Questions to Ask
- Will the agent help you compose your offer to purchase a home? If not, who does help?
- If the agent uses fill-in-the-blank forms, ask for a blank sample copy to take home and study.
- What types of disclosures are sellers in your area required to give to buyers? Can the agent give you a sample copy of typical disclosures?
- What types of home inspections are standard in your area? Are there other inspections that the agent recommends?
- How much do the inspections usually cost? Are they regarded as a buyer expense?
- When are inspections done?
- Is a survey required for most transactions? If so, who typically pays for it, the buyer or the seller?
- Does an attorney or title company do a title search to verify that the deed is problem free? What’s the average cost for that service?
- Who acts as settlement agent, the person who puts together final paperwork for you to sign? (attorney, title company personnel, real estate broker, other)?
- Other than loan costs, what’s the average total cost for other closing fees?
- Taxes, settlement agent fees, etc.
- How long does it usually take to close on a home once an offer is accepted?
That’s a good start. After you have the answers to those questions, you’ll have a better feeling for the basic customs in your area.
It’s important to study your local real estate market before you seriously look at houses so that you can make educated decisions through out the process.
As your agent, I can get you a report of sold comparables and we can look at what current listings are being priced at to reveal the mindset of sellers in your market.
Start browsing the real estate market in your town now, before you talk to a real estate agent or for sale by owner seller.
- Browse listings on the my website of the entire MLS market
- Pick up real estate for sale books in your area.
- Read real estate ads in the local newspapers.
- Take adventure drives and look for For Sale signs. Note which neighborhoods you like the best.
- Make changes to your Wants & Needs list if necessary.