Home Buying Process, What I Should Know...

The process of buying a house can seem overwhelming at first glance, so I have created a 'buying a house checklist' of sorts to get you through the home buying process. Let's get started! As a professional Realtor, we know the first step most home buyer's do is start looking for homes online. The more homes a potential buyer sees on the MLS (multiple listing service), usually the more excited they are about home buying! I'm sure you are no different! It's great to get an idea of the price of homes, the location and start to form an opinion of what styles of homes might appeal to your lifestyle... unfortunately, this really isn't the first step to buying a house.

The first step is the bank pre-approval

Typically, not the first step potential home buyer's take, but it is a true step toward homeownership. A preapproval from a bank or credit union does several important things right of the bat. First, the bank you pick will verify your credit score, review your debt as it relates to repayment of the low and also an important piece they will review payment scenario's, review loan programs and once approved, they will give you an idea of the range of home pricing you should be looking at.

The second, very important part to having a preapproval first... seller's will know you're serious. You cannot ever write an offer on a home without being preapproved first. In a fast moving Real Estate market (which we're in) you need to be prepared, if not, you're likely to miss a chance at a house that might be perfect for you. The third important part of a preapproval... what if you don't qualify? Various income situations are hard to qualify for a loan, however, the rules of lending have changed and there are lots of options out there to get you qualified. If for some reason you are not qualified right now, a lender or a Realtor can help you keep your eye on the prize, and let you know what steps you will need to take to get ready to buy, a game plan of sorts. As Realtor's the last thing we want to do is show you a house that you would love to buy, only to find out that you can't. Heartbreak is never the goal and getting preapproved in advance eliminates many possible hiccups going forward.

The Second step is to find a Realtor

Now you may have found a Realtor first, that's okay... most Realtor's have a go-to lender and provide you with a referral to an experienced lender, or loan officer, ready and eager to help you with your home purchase.

Traditionally all Realtor's used to work for the seller. Now things have changed and buyer's will hire their own Realtor to work on behalf of their best interests. You will want to find someone that has been in the business for a while and know the particular area that you would like to buy in. The Realtor's job will be to ensure that you are purchasing the property at a fair market price. They will oversee the paperwork and ensure that you, your assets and all available knowledge of the property is disclosed to you before you make that purchase. The Realtor is also there to negotiate on your behalf, point out any repairs, offer referrals for general repairs, suggest an inspector and proactively deal with any anticipated issues so that you have a smooth home buying process. Things you may not know about having a Realtor... they are paid by the seller. Other than a small administrative or brokerage fee charged by the Real Estate Broker, all those important items of value listed above are provided for you at next to nothing. When you consider home buying to be not only your largest purchase but your best future investment, it's important to have someone guiding you throughout the process with knowledge and experience. So, how do you find a Realtor? You can contact our team to find someone in your area with the knowledge and skills listed, you can ask a friend or family member for a referral. It's not terrible to meet a few, not everyone is a perfect match, so find a Realtor that you trust and is always looking out for your best interests. Once you find them and feel like they're a match, don't be afraid to sign a contract with them. By signing the contract you are also locking them in to provide fiduciary responsibilities on your behalf. The agreement goes both ways and is really just an outline of how your relationship goes forward. Your Realtor will explain all the fiduciary responsibilities further but loyalty, confidentiality, reasonable care and obedience are very important when talking about representation for a home purchase.

The third step is to be knowledgeable about fees

So here we are, you have a reputable lender that has helped you stay within your budget, reviewed payment scenario's and now you have your ideal budget and payment in mind. You feel great about signing a contract with your Realtor and you're ready to start looking at homes. Since you likely started your home buying process by looking online, you probably have an idea of a location, size and style of home you're interested in. Before you hop in the car to look, let's outline a few expectations. Your Realtor will likely go through these with you at your first meeting or during a home tour, but let's bring them up now as a part of the home buying process. Do you have your downpayment ready? Depending on the loan type you're interested in and qualify for, the percentage of money down will vary, but you should have this money ready before you consider buying a house. For a federally funded loan or FHA, the standard down payment is 3.5% down, and you can qualify for this loan as a first-time home buyer, or if you have not made a purchase on a home for 3 years or more. A traditional loan is a conventional loan, newer products of conventional loans will be 3%, 5%, or 10% down. Zero downpayment loans still exist, since programs vary, talk to your Realtor about pro's and con's of these programs, specific to your area.

Do you have your earnest money ready? Earnest money is the amount of money that you will put 'down' on theproperty when you write your offer. The earnest money is designed to show how interested in the property you are. This many can be a gift from a family member your friend, but be sure to talk to your lender about where this money is coming from as it will be very important to show a proper paper trail.

The earnest money is typically 1% of the purchase price, but can always be more. Again, your Realtor will give recommendations to the amount but you should be aware of these fees. It's always recommended to have a buyer's inspection done on the property. In most states, this is the buyer's expense. A home buyer inspection can run $350-$550 depending on the inspector and the size of the home. This fee will be paid prior to closing so it's important you know of this going forward and have funds ready for this step.

Depending on your location and lender, you may have to pay for an appraisal upfront. The fee is usually $400-$500 and can sometimes be made part of your closing costs, however, most lenders will ask that you provide a check for this fee prior to closing. **All purchases are a little different, this list is in no way all encompassing of every home purchase** Now that we have most of the upfront fees outlined, you're financially ready to write an offer and commit to the home buying process.

The fourth step, Let's find a house!

What type of home are you looking for? A first-time home buyer fixer-upper, a home that's move-in ready and fully finished, new construction? Weigh the pro's and con's of each home, but ideally find a home that you could live in for 5 years or more. Be aware of the resale value and the potential to gain equity. There are many benefits to homeownership so ask what they are! [idx-omnibar extra="0" styles="1" ]

The fifth step, let's make an offer!

You found the one! A purchase agreement will be drafted and submitted to the listing agent on the property. The listing agent will review the offer with the seller's and make a decision as to how they want to proceed. Three options exist, the seller can accept the offer as written, counter the offer (suggest changes), or reject it if it's too low etc. A series of counter-offers can occur until both, buyer and seller come to full agreement on how to proceed. All signatures are completed and the earnest money is submitted with the accepted offer.

The sixth step, complete a buyers inspection

Hire a certified home inspector to check the structure/foundation and full mechanicals of the house. The purpose of the inspection is to identify any potential hazards, items, not up-to-proper codes and give you a general overview of how well the house was built and how well the house has been maintained over the years. The inspector will also be looking at the age of the roof, appliances, furnace, water heater and air conditioner to it's expected life. Knowing the age of these items will give you an idea of what will need to be repaired or replaced in the coming years. This is also a time for potential renegotiations of the contract based on the findings of the inspector.

The seventh step, the appraisal is completed

The appraisal is ordered by the lender (credit union or bank) to ensure that the price you are offering meets general market value. The bank is ensuring that if you were to default on the loan, that they could potentially be able to sell the property and recoup the loan value. The lender may also require some repairs to take place in order to fund the loan (give you the money to buy) this is also to ensure it's a functional home and safe for occupancy.

The eighth step, the closing

Yes!!! You made it! The house has met all requirements implemented by you, the inspector and the bank and you have satisfied all the documentation that your lender has requested in order to complete the loan process. This is where you will actually sign all the closing paperwork agreeing to the terms of the loan, and the repayment schedule of the loan. The title company or an attorney will be present to ensure all paperwork is signed completely and the title on the property is clear and able to transfer to you. You will also be bringing your final fee (down payment to the closing) this is typically in the form of a cashier's check so ask your lender. Once documents are all signed, the house is yours!! You will be given the keys and access to your new home! Congratulations!! The steps outlined here are just a guide to prepare you for the process, behind the scene's things have been left out for simplicity, but that's just another reason to hire a great Realtor to act on your behalf. If you would like to contact one of our agents, or need a referral to your area, you can connect with us here, or call 612-807-4858. Happy Home Buying!