Eight Steps To Buying Your Home
1. DECIDE TO BUY.
Although there are many good reasons for you to buy a home, wealth building ranks among the top of the list. We call home ownership the best “accidental investment” most people ever make. But, we believe when it is done right, home ownership becomes an “intentional investment” that lays the foundation for a life of financial security and personal choice. There are solid financial reasons to support your decision to buy a home, and, among these, equity buildup, value appreciation, and tax benefits stand out.
Base your decision to buy on facts, not fears.
- If you are paying rent, you very likely can afford to buy a home
- There is never a wrong time to buy the right home. All you need to do in the short run is find a good buy and make sure you have the financial ability to hold it for the long run
- The lack of a substantial down payment doesn’t prevent you from making your first home purchase. There are many loan products available for those with a limited down payment
- A less-than-perfect credit score won’t necessarily stop you from buying a home
- The best way to get closer to buying your ultimate dream home is to buy your first home now and build from there
- Buying a home doesn’t have to be complicated – there are many professionals who will help you along the way
2. HIRE YOUR AGENT
The typical real estate transaction involves at least a dozen separate individuals- mortgage brokers and underwriters, inspectors, appraisers, escrow officers, buyer’s agents, seller’s agents, title researchers, and a number of other individuals whose actions and decisions have to be orchestrated in order to perform effectively and get the home sale closed. It is the responsibility of your real estate agent to expertly coordinate all the professionals involved in your home purchase and to act as the advocate for you and your interests throughout the transaction.
Seven main roles of your real estate agent
A Buyer’s Real Estate Agent:
- Educates you about your market.
- Analyzes your wants and needs.
- Guides you to homes that fit your criteria.
- Coordinates the work of other needed professionals.
- Negotiates on your behalf.
- Checks and double-checks paperwork and deadlines.
- Solves any problems that may arise.
- Closes the deal and welcomes you home
Eight important questions to ask your agent
Qualifications are important. However, finding a solid professional agent means getting beyond the resume and into what makes an agent effective. Use the following questions as your starting point in hiring your licensed, professional real estate agent:
- Why did you become a real estate agent?
- Are you a full time agent?
- How long have you been an agent?
- Why should I work with you?
- What do you do better than other real estate agents?
- What process will you use to help me find the right home for my particular wants and needs?
- What are the most common things that go wrong in a transaction and how would you handle them?
- What are some mistakes that you think people make when buying their first home?
- What other professional’s do you suggest we work with and what are their credentials?
- Can you provide me with references or testimonials from past clients?
3. SECURE FINANCING.
While you may find the thought of home ownership thrilling, the thought of taking on a mortgage may be downright chilling. Many first-time buyers start out confused about the process or nervous about making such a large financial commitment.
From start to finish, you will follow a six-step, easy-to-understand process to securing the financing for your first home.
Six steps to Financing a Home
- Choose a loan officer (or mortgage specialist).
- Make a loan application and get preapproved.
- Determine what you are comfortable paying in a mortgage and select a loan option.
- Submit to the lender an accepted purchase offer contract.
- Get an appraisal and title commitment.
- Obtain funding at closing.
4. FIND YOUR HOME.
You may think that shopping for homes starts with jumping in the car and driving all over town. And it’s true that hopping in the car to go look is probably the most exciting part of the home-buying process. However, driving around is fun for only so long-if weeks go by without finding what you’re looking for, the fun can fade pretty fast. That’s why we say that looking for your home begins with carefully assessing your values, wants, and needs, both for the short and long terms.
Questions to ask yourself
- What do I want my home to be close to?
- How much space do I need and why?
- Which is more critical: location or size?
- Would I be interested in a fixer-upper?
- How important is home value appreciation?
- Is neighborhood stability a priority?
- Would I be interested in a condo?
- Would I be interested in new home construction?
- What features and amenities do I want? Which do I really need?
5. MAKE AN OFFER.
When searching for your dream home, you were just that……….a dreamer. Now that you’re writing an offer, you need to be a put on your business cap. You need to approach this process with a cool head and a realistic perspective of your market. The three basic components of an offer are price, terms, and contingencies.
Price – The right price to offer must fairly reflect the true market value of the home you want to buy. Your agent’s market research will guide in this decision.
Terms – The other loan and timing frames that will be included in the offer.
Terms fall under six basic categories in a real estate offer:
- Schedule- The time frame for which all of the events that have to happen before closing.
- Conveyances – Items that are included in the sale.
- Closing costs – In today’s market, it has been standard for buyers to pay their closing costs, but if you want to roll the costs into the loan, you need to write that into the contract.
- Home warranty – T typically covers repairs or replacement of appliances and major systems. The seller may sometimes pay for this.
- Earnest money – This is a deposit that is made at the time of your offer, which is customarily 3% of the purchase price. This shows the seller that you are serious buyer and you have a “stake in the game”.
- Contingencies – Typically there are contingency time frames built into the contract that allow the buyer time to do their due diligence. For example, some of these contingencies can be a home inspection, loan or appraisal contingency.
6. PERFORM DUE DILIGENCE.
Unlike most major purchases, once you buy a home, you can’t return it if something breaks or doesn’t quite work like it’s supposed to. That’s why property inspections are so important.
A homeowner’s insurance policy typically protects you in two ways:
- Against loss or damage to the property itself
- Liability in case someone sustains an injury while on your property
The property inspection should expose the secret issues a home might hide so you know exactly what you’re getting into before you proceed with buying a home.
- One major concern should be if the home as any structural damage. If you are a contractor or builder, this may not be a concern for you. If you are not handy, this may be a deal breaker.
- Don’t sweat the small stuff.
- If you have a big problem show up in your inspection report, you should bring in a specialist to assess the situation in order for you to make an informed decision on whether or not to proceed with the purchase. This is where your agent is worth their weight in gold. They will have relationships in place to effectively direct you to the appropriate specialist, should you need one.
- In some instances, buyers may choose to have a property surveyed in order to establish the properties boundaries. This is not a condition for sale in California.
The final stage of the home buying process is the lender’s confirmation of the home’s worth and legal statue, and your continued credit-worthiness. This entails an appraisal, title search, and a final check of your credit and finance. Your agent will keep you posted on how each is progressing. You will be advised when loan documents have arrived in escrow and the signing of those documents will be arranged for you.
You just have a few pre-closing responsibilities to keep in mind:
- Stay in control of your finances. Make sure not to make any large purchases during the loan process. This can affect your debt to income ratios and sometimes affect you being able to obtain your loan. Save large purchase until after escrow closes.
- Return all phone calls and paperwork promptly to both escrow and your agent.
- Communicate with your agent at least once a week.
- Several days before closing, confirm with your agent that all your documentation is in place and in order.
- Obtain certified funds for closing and deliver them to escrow
- Sign loan documents
- Conduct a final walk-through of the property to make sure the property is in acceptable condition.
As long as you have clear expectations and follow directions, closing should be a momentous conclusion to your home-searching process and commencement of your homeowner experience.
8. PROTECT YOUR INVESTMENT.
Throughout the course of your home-buying experience, you’ve probably spent a lot of time with your real estate agent and you’ve gotten to know each other fairly well. There’s no reason to throw all that trust and rapport out the window just because the deal has closed. In fact, your agent wants you to keep in touch.
Even after you close on your house, you agent can still help you:
- Handle your first tax return as a homeowner.
- Find contractors to help with home maintenance or remodeling.
- Help your friends and family find homes.
- Keep track of your home’s current market value.
Attention to your home’s maintenance needs is essential to protecting the long-term value of your investment.
Home maintenance falls into two categories:
- Keeping it clean: Perform routine maintenance on your home’s systems, depending on their age and style.
- Keeping an eye on it: Watch for signs of leaks, damage, and wear. Fixing small problems early can save you big money later.