The Buying Process
Your home purchase is probably the biggest financial investment you’ll make. Before you get started looking for your dream home let’s take a look at the home buying process.
1. Determine How Much You Can Afford
To begin the process, it’s important to determine how much home you can afford and what payment amounts you feel comfortable making each month. This will help you identify a price range in which to begin your home search. It’s very important not to skip this step. Buyers who don’t understand their affordability range waste time looking at homes that may be too high or low in price. The best way to obtain a clear picture of how much home you can afford is to speak with a reputable local lender and let them analyze your situation. The lender can calculate your debt to income ratio, do a quick credit score, and review loan programs that fit within your budget. I strongly recommend that you speak with a lender and obtain a loan pre-qualification letter prior to starting the home buying process. This will save time, allow you to focus on a specific price range, and make you more confident when making an offer. Additionally, in today’s market, most sellers are requiring that a buyer pre-qualification letter accompany the buyer’s initial offer.
2. Choose a Real Estate Professional
Today’s technology makes it much easier to locate homes that are for sale, however it’s still a good idea to have a real estate professional assist you with your home purchase. The seller of the home you purchase will most likely have a real estate professional looking out for their interests; you should have one looking out for yours. A real estate professional has access to a network of contacts and can draw from extensive market insight to help pinpoint the right house at the right price in a timely manner. A real estate professional can help you better understand the local housing market, set showings for your schedule, provide you with comparable neighborhood sales, negotiate a sales price, draft the purchase contract to protect your interests, and guide you through the inspection and escrow process. When selecting the right professional for you, choose an experienced professional who has a history of successfully closing sales in different situations or under difficult types of conditions. It’s imperative to have a professional who can successfully navigate your home through the close of escrow while calmly handling any unexpected problems. Make sure your professional has enough time to spend for you. Find out if he or she handles everything personally, from beginning to end, or if you will be serviced by their assistant. Will they advise you and help complete the contracts, disclosures, inspections, and escrow paperwork necessary to close the sale? Will they be personally available to answer your questions when you call?
3. Shop for a Home
House hunting can be both exciting and frustrating. You should plan on viewing several homes before buying one. It's a good idea to put together a checklist of important qualities that you would want in your future home. Some questions you might ask yourself are:
What size? Is there enough room for your family to grow in the house?
Single or Two stories? Does the floor plan work for our family?
Is the house in move-in condition or will it need work?
Is the yard right for your needs? Does it have a Pool?
Is it close enough to everyday needs, such as grocery stores, schools, work?
Will you feel safe here?
Next, share the list with your real estate professional to help you identify the available properties that provide the best match. Have your professional make arrangements for you to see the homes. They often times look much different in person compared to what you saw on the computer. When viewing homes you want to make sure you’re focused. Eliminate any distractions, get a sitter and leave the kid at home, and take pictures or notes on each home so they don’t start blurring together.
4. Make an Offer
When you’ve found the right home, it’s time to make an offer. How much you offer may depend on a number of factors. Some of these include:
Is the asking price fair? How close is the asking price to the recent sales of nearby comparable homes?
Is the house in goodmove-in condition or will it need a lot of work?
Has it been on the market long? Usually the longer a house has been on the market, the more likely it’s overpriced and that the owner will accept a lower offer.
Is it a seller’s or buyer’s market?
Once you’ve determined how much you’d like to offer, your real estate professional will work with you to determine the best deposit, down payment, loan amounts, escrow period, contingency time periods, and additional details to complete your offer to purchase.
Remember, this can be just the beginning of the negotiation process, so it’s a good idea to make your offer anticipating a negotiation and give yourself some flexibility on your price and terms. Upon receiving your offer the seller will have three options: accept your offer, counter your offer, or reject your offer. If you’re successful, you and the seller will come to an agreement on the price and terms and open escrow.
When your offer has been accepted, an escrow is opened and a flurry of activity begins. Simply put, the purpose of escrow is to provide a safe place for the transaction of the buyer’s money to swap hands with the seller’s property deed. You, your real estate professional, and your lender will be busy coordinating, ordering appraisals, obtaining loan approval, and performing various physical inspections to learn more about the property. When you have received all your inspection reports and disclosures you will generally have three options: accept the property in its current condition, negotiate with the seller to make certain repairs, or reject the property based upon an unfavorable inspection report. If everything looks good, you’ll proceed forward and work to close escrow when your loan company formally approves your loan. At that time, you will have a final walkthrough of the property to make sure the property has been maintained and that any agreed upon repairs have been made. You’ll place the remainder of your down payment and closing costs into escrow and sign your loan documents. The escrow will use your money to pay the seller and record a new deed in your name. Escrow will provide you with an accounting of your transaction called the settlement or closing statement. (Make sure you keep a copy of this for your tax records!). Congratulations you are now a homeowner!