The 4 Step Process to Buying a Home
Step 1: Unless you are paying cash for your home or property, the first step is to contact lenders and find out how much you are qualified to borrow. It doesn’t make much sense to look for a $300,000 home and then discover that your lender can only offer you $200,000. Before you begin looking, contact several lenders and compare both service and rates. Once you find the lender that’s right for you, be sure to obtain a “pre-approval letter”. Make a copy of this letter to give to your real estate agent.
Tip: have your financial information such as W-2’s, employment history, contact information, credit and banking information available when you contact the lender. This will speed the approval process. For a list of lenders, visit this page.
Step 2: After obtaining your pre-approval letter, you’re ready to start looking for a home. Your next step is to find a Buyer’s Agent who will represent you and assist you in the home buying process. A buyer’s agent offers his or her services at no charge. Your agent will assist you by searching the MLS (multiple listing service) for all available homes that meet your requirements (price, size, area, schools, etc.) Your agent will also make appointments so you can view the homes in which you are interested.. One you have selected a home, your agent can assist and advise you about how much to offer and will deliver the contract/offer to the seller/seller’s agent. Your agent will also assist in negotiating counter-offers from the seller. Once the offer has been accepted and all parties have signed, the contract is binding and is taken to the title company for processing.
Tip: Many new buyers are very excited about purchasing a home. Do not tell the sellers that “this is the perfect house and we just have to have it”. This could cause the sellers to be less likely to negotiate with you on the price. Allow your agent to do all the talking and negotiating on your behalf. Your agent is trained to do this and work to obtain the best deal possible.
Step 3: While the contract is at the Title Company and you are waiting for all paperwork required at the closing, you will be conducting inspections of the home to determine that there are no major problems. You will need to hire and pay for a licensed home inspector to do an independent home inspection. The home inspector will give you a detailed report (approximately 10-15 pages) which will show what is right and wrong with the home. Usually there will be minor items that can easily be corrected by the seller or yourself, but occasionally there are major items that appear on the report such as foundation cracks, faulty wiring, roof repair, or other items. If a major problem is found, you can request that it be corrected by the seller or you can cancel the contract (sometimes there is a penalty if you cancel after the inspection period known as the option period). You should also have a pest control company inspect for termites which can be treated before the closing. These inspections take place during what is known as the “Option Period”. During the option period, you can cancel the contract at any time or for any reason and only lose what you spent on the inspections (around $300) and your “Option Fee” (usually around $50-100). Once everything is taken care of after the inspections your lender will also do an appraisal and a survey which will be included in your closing costs.
Tip: Every home has faults. Don’t get upset when the inspection report shows problems. Discuss each item with your agent who can explain which items are serious issues and must be fixed and which items are minor issues that may be “grandfathered” code issues or small things that can be fixed by you with little effort. Also, when dealing with your lender during this stage of the transaction, it is important to stay in constant contact and make sure that you provide all of the documents and information they ask for in a timely manner. Do not open new credit lines or make major purchases at this time.
Step 4: Once all inspections are completed and cleared and all parties are satisfied with the condition of the home, a closing date will be set. The Title Company will obtain all of the required documents needed to sign to complete the sales transaction. When they have received all needed documents, they will call both the buyer and seller to set a closing date. It is not necessary that the buyer and seller sign the documents at the same time as long as they both sign the papers. Your agent will receive a “HUD 1” on the closing costs the day before the closing. This document will explain all costs incurred by you and the seller and will tell you exactly how much money you will need to bring to the closing in a cashier’s check. Your agent will more than likely attend the closing with you to assist you and answer any questions you may have and to correct any inaccuracies in the documents. Once everyone has signed the papers and the lender has wired the money, you will become a new homeowner and will receive the keys to your house.
Tip: Be sure to bring your drivers license to the closing as all documents will need to be notarized. Also, when you receive the final closing cost amount from the Title Company, you need to bring certified funds in the form of a cashiers check, not a personal check. It is also a good idea to do a “walk-through” the day before the closing to make sure that nothing in the house has changed, is damaged, or is missing.
If you have a question about buying a home, email us at TheSilverStarGroup@gmail.com or call 832-200-5686.