Home Buying Process
Home Buying Process… 10 Steps to Buying a Home
1- Find a Qualified REALTOR at Midas Realty Group
When Buying a Home, You Need a Professional Home Buyer’s Advocate On Your Side!
Defined most simply, a buyer’s representative (or buyer’s agent) is an advocate for the buyer—not the seller—in a real estate transaction. Real estate laws and regulations vary from state to state, but buyer’s representatives usually owe full fiduciary (legal) duties, including loyalty and confidentiality, to their buyer-clients and keep their best interests in mind through the entire transaction. In some states, consumer protection legislation has been enacted that defines the assumed relationship between a buyer and a real estate agent as that of client and buyer’s representative. If an agent is representing both home buyer and seller, the agent cannot provide full confidentiality to the homebuyer since the same person is representing both buyer and seller. At Midas, you will enjoy the services of a qualified ABR® that will look out for your own best interest.
Your Realtor® can assist you in communicating with your lender and in understanding some of the terminology. Today, a pre-approval letter will be necessary prior to submitting an offer on a property.
2– Assess Your Credit and Finances
Because any lender you apply to for a mortgage will verify your credit history, it’s wise to check your own credit rating in the beginning of your home search, even if you’re sure you have an excellent credit record. There may be blemishes in your credit history that you don’t know about. Identifying and resolving any credit problems to improve your credit rating will provide benefits, such as preferred rates from lenders and home insurers. Acquiring a copy of your credit report is simple. The Fair Credit Reporting Act allows consumers to obtain one free credit report from each of the three major reporting bureaus every 12 months. To obtain a report visit:
www.annualcreditreport.com—the only authorized source for consumers to access their annual credit report online for free. Or, call 877-322-8228. The three major credit bureaus:
P.O. Box 740241
Atlanta, GA 30374-0241
P.O. Box 949
Trans Union Corporation
P.O. Box 390
Springfield, PA 19064-0390
3- Get Pre-Approved for a loan
There’s a difference between pre-approval and pre-qualified…
Typically you will first pre-qualify for a mortgage, then get pre-approved before you submit an offer on the specific home you wish to purchase. What is the difference?
Pre-qualification: An informal determination by a lender or mortgage broker stating the amount of the mortgage you can afford.
Pre-Approval A guarantee in writing by a lender to grant you a loan up to a specified amount. A pre-approval letter will be necessary prior to submitting an offer on a property, and you may be required to show the proof of funds and documentation to show that you are ready willing and able to make the purchase.
Selecting a Lender
When selecting a lender, your goal is to obtain a mortgage loan with terms that are most favorable to your situation. In order to find the best home loan for you, contact several lenders to discuss the mortgages they offer, their rates, closing costs, and other fees. If you have a mortgage now, contact that institution. Mortgage loans are available from many sources, including:
Savings and loan associations
4- Assess your Wants and Needs
In homes as in life, there is a difference between what we want and what we actually need. Before actually visiting homes for sale, it is imperative that you have a good idea of the type of property you want to call your own. Firstly, you must be realistic in your price goals. You should look at homes at or under the dollar amount of your pre-approval letter. Do no even look at homes above your pre-approved amount and “WISH” that you can get the seller to reduce the price by $60,000 because you think you credit is wonderful. You should also realistically evaluate the number of bedrooms and bathrooms needed, proximately to work, schools, shopping and transportation. Finally, determine the type of property that will best suit your needs i.e.- condo, single family residence, duplex, etc. Also note that a pre-approval letter for a condo will be a different dollar amount than that for a house. The condo will have HOA dues that will be factored into your monthly dept. The higher the HOA dues, the lower the pre-approval amount.
5- Shop for Your Home
The decisions you make in the home-buying process will determine the neighborhood and home where you will live—and the financial terms by which you will pay for your home. But with so many neighborhoods and all the homes on the market in each one, narrowing your choices can be a harrowing task, especially if you’re not familiar with the area. Your buyer’s representative can be invaluable, helping you find resources to learn what you need to know to make informed decisions. Note: Under Federal Fair Housing Laws it is unlawful for a real estate professional to engage in conduct that is discriminatory on the basis of race, religion, color, national origin, sex, handicap, or familial status. A real estate professional should never steer you towards or away from a particular neighborhood if the homes there fit your needs and are within your range of affordability.
Factors to Consider When Evaluating a Neighborhood
Spending time in a neighborhood can tell you a lot about it, but not everything; you also need to do some research. Depending on your particular needs and preferences, some factors will be more important than others, but things to consider include:
Neighborhood Profile: Research neighborhood aspects such as population density and the level of commercial development. Ask yourself “What kind of neighborhood do want to live in?” City? Suburban? Small town? Rural?
Household Data: Take into account family type, average household income, and homeowner education level and occupation.
Crime Rate: Crime is an unfortunate reality we must all deal with. Probably no neighborhood is totally immune from the risk of crime, but by researching the incidence of reported crime in the neighborhoods you are considering, you can make an educated
decision about where you live.
Quality of Schools: Base your evaluation on school performance, as determined by average test scores, spending per student, and the percentage of college-bound students and national merit scholars.
Amenities: What features you want in a neighborhood will be determined by the lifestyle you lead. Amenities to consider include proximity to: schools, place of employment, shopping, transportation, parks and recreation, restaurants and nightlife, cultural institutions, and natural resources, such as state parks.
6- Negotiate Your Terms
Making the Best Deal: Why Making the Deal is a Big Deal
Once you’ve found the home you want to place an offer on, the next step is reaching an agreement with the owner about the price, how and when you can buy it. Throughout this process, there are many important considerations that can impact your finances, tax situation, and legal obligations. When you consider that you will live with the decisions you make about these issues— perhaps for a long time—just how big a deal your home purchase is becomes obvious. Your buyer’s representative can help you navigate the way through much of the transaction process, but may also advise you to consult legal and tax experts.
Assess your negotiating position prior to making an offer. Here are some basic rules to help you.
You are in a strong bargaining position (the seller will look favorably on your offer) if:
You are an all-cash buyer.
You are pre-approved for a mortgage.
You do not have a house you need to sell, or other contingency that must be met, before you can purchase the home.
With these factors in your favor, you may be able to negotiate a reduction on the listed price.
In a “hot” seller’s market, if your “perfect” home comes on the market, you may want to offer the list price (or more) to beat out other offers.
It may also be helpful to find out why the house is being sold and if the seller is under pressure to close a deal quickly. Consider that:
1-Every month a vacant house remains unsold represents considerable added expense for the seller.
2 If the sellers are divorcing, they may just want to close quickly.
3-An estate sale often yields a bargain in return for a promptly closed transaction.
7- Inspect the property
REBAC recommends that you have the home you want to purchase professionally inspected—even if it’s new construction—to identify potential expenses that might not be immediately detectable during your viewings of the home. (Imagine finding out that you need a new roof or furnace the day after you move into your home.) Schedule an inspection with a qualified home inspector within the time specified in the inspection contingency of the purchase contract. Your buyer’s representative should be able to assist you in identifying a number of inspectors to choose from.
8-Finalize Your Mortgage
Rates and Duration
Two of the biggest choices you’ll make in determining your mortgage are the interest rate and duration. Combined with the amount you borrow, they will largely determine the amount of your monthly payment. The interest rate is the percentage of the loan amount you are charged to borrow the money; the higher the rate the more you pay. Mortgage rates change, subject to various economic factors. To be more certain of what they pay, most buyers “lock” their rate when they apply for their mortgage. A lock means that the rate in the approved application will be valid for a set period of time— during which the deal must be closed—regardless of what market interest rates are at the time of closing. With fixed-rate mortgages, usually 15- or 30-year, you are charged the same percentage over the life of the mortgage. The rate changes in an Adjustable- Rate Mortgage, or ARM, after a set number of years.
Closing Costs and the Truth in Lending Statement
There are other costs associated with a mortgage. They might include an appraisal and “points,” a fee based on the amount of the loan. Depending on the amount of your down payment, you may also be required to carry mortgage insurance, a policy that pays your mortgage if you are unable to. So that you can see all that you’re paying for the home over the length of the mortgage, you will be given a Truth in Lending Statement, which is a federally-required good-faith estimate of all the costs associated with your mortgage and the purchase of your home.
9- Prepare for the Close
The financial institution providing your mortgage will demand that the home you are purchasing is insured, so you must obtain homeowners insurance before closing and provide proof of the policy. Allow plenty of lead time before closing to find homeowners insurance. Costs and coverage can vary, so obtain at least three quotes from different companies. When evaluating the policies to find the right one for you, consider questions such as:
What is covered?
What is not covered?
How much will the insurance cost?
Are discounts available for such things as smoke detectors and fire alarms, burglar alarms, non-smoking owners, combined auto and home policies, higher deductibles?
What is the deductible?
Is the home in an area prone to hurricanes where wind insurance may be a separate policy?
Is the home in a flood zone where separate flood insurance is required?
Note: Some personal items such as expensive jewelry or valuable collectibles may not be covered in standard homeowners policies. When getting your quotes, include an inventory of your possessions to see if riders are required to cover these items. To determine eligibility and premiums, insurers are increasingly investigating an applicant’s claims history. Past claims made on the property to be insured are also a factor in determining coverage and premiums. Some insurers also examine the applicant’s credit report.
It is important to schedule the utilities to be on once the transfer takes place. You will need to contact the local water, electric, gas (in some cases propane), telephone and television services (cable or satellite). You want to make sure there are lights and water on the day of the move in.
It is important not forget to submit a change of address to the post office, as well as inform friends, banks, credit card companies and those with whom you need to stay in contact.
The actual and legal transfer of ownership is called the closing, or settlement. Possession is usually transferred within 3 days of closing, but not always. For various reasons, the seller may request to close the sale yet retain possession, renting the property from the buyer until the seller vacates the property and possession is transferred.
You will be called to sign your loan documents, and you will either do this at the escrow office or a mobile notary may be sent to your home, office, or any convenient place to sign.
Reviewing the Documents
Make sure you understand the documents you are signing and if you have any questions, either ask the notary for definitions or call your loan officer for specific mortgage questions. Closing costs can include many different expenses and can add up to a sizeable amount of money. Be prepared. Know exactly what your closing costs are and how much you will be expected to pay at the closing meeting. Once the documents are signed, they are returned to escrow and forwarded to your lender for final review. Once all of the documents and any outstanding conditions are reviewed and complete, the money will be wired to the title company by your lender. The escrow will arrange for the recording of the documents and once recorded, you are a homeowner.