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Need
Analysis
Congratulations on your
decision to purchase a new home. Your first step toward buying your new home
will be to analyze your needs. By analyzing your needs you will be able to get a
clear picture of exactly what you want your new home to look like and how it
should function for you.
First, you should write down why you are looking for a new home. For example,
are you currently renting and would like to have a home where you can begin
building equity? Maybe you recently married and have outgrown your current
residence. Or, maybe you have just gotten a promotion which requires you to move
to a new city. These factors will all have a bearing on how you approach your
home search.
Second, establish a time frame that you would like to stay within for buying
your home. Depending on your reasons for wanting a new home and the current
state of the market in the area you are looking to buy, you should be able to
come up with a rough guideline which you can finalize at a later time.
Last, you most likely have a mental picture of what you would like your house to
look like and what features it should have. It's very important to write these
ideas down to avoid any ambiguity later in your home search. You should make at
least two lists: one should be a list describing your dream home and the other
should list the features of the home that are an absolute must have in order to
buy it. In a perfect world, your new home would fulfill both lists 100 percent.
It is more likely that you will end up blending the two lists into a schedule of
prioritized items as you progress through the buying process. This is a natural
and evolutionary process as you get clearer about what you want and what is
available.
Your agent can save you time and money by putting their expertise to work for
you. They will be able to help you organize your wants and needs and then assist
you in realizing how your wants and needs will fit into your home purchase plan.
He or she will be able to helpfully focus your energies into what is possible
for you and your family.
Pre-Approval vs. Pre-Qualification
Now that you have your
list of features you want in your new home, you are ready to start looking!
Well, not just yet. You are going to need to know in what price range to look.
There are two ways to go about this. You can get pre-qualified or pre-approved
for a mortgage. Either way you will need to contact a mortgage company. Go to
our Mortgage Center to investigate rates and companies in your area.
There are some key
differences between prequalification and pre-approval for a loan that you need
to be aware of. Loan prequalification is a simple process. It takes into account
very basic information regarding your financial status and gives you an amount
for which you may qualify. This can be done strictly on a verbal level or
electronically over the Internet. The pre-qualified amount is based solely on
the information you provide. In most markets, pre-qualified buyers usually hold
little clout compared to pre-approved buyers due to the fact that the
information given during the prequalification process is not thoroughly
investigated and therefore may be unreliable. Where a pre-approved buyer is
actually approved for a loan of a certain amount, a pre-qualified buyer is only
told that they might be approved for a certain amount.
Pre-approval is a much
more involved process. The lender will take all pertinent information regarding
your finances and perform an extensive check on your current financial status.
This will ultimately give you the exact amount that you will be eligible for
(depending on what type of loan you decide to go with). Being pre-approved lets
the seller know that you have gone through an extensive financial background
check and there should be no unexpected obstacles to buying the home. You can
see how being pre-approved would be more attractive to a seller than just being
pre-qualified.
The type of mortgage you
apply for will depend on many factors, but the majority of that decision will be
based on your ability to pay a monthly installment. If you can only afford a
$1000 dollar a month payment, you are not going to go out and buy a $250,000
home, unless you have a large sum of money set aside to make a sizable down
payment! Financial planners say that you shouldn't pay more than 28% of your
gross income for housing (that includes principal, interest, taxes, and
insurance). Depending on your debt to income ratio, that percentage may change.
Once you have determined
what you can afford, the next step is to choose a mortgage plan. There are many
different mortgages out there, so take some time and explore all of the possible
plans for which you qualify. You could save yourself thousands of dollars in the
long run!
Your agent can save you
time and money by being your professional guide through the entire loan process.
They will be able to counsel you on the advantages and disadvantages of certain
types of loans and help you understand the "real" cost of a mortgage. Your agent
will also act as your personal advocate and liaison between you and the lender
as you proceed through the approval process and closing by working with your
lender on a regular basis.
Neighborhood Information
Now that you have your
list of needs and wants and you know how much you can afford to spend, it's time
to look at some houses! Well, not just yet. Step back for a moment and consider
the larger picture. People don't just buy a house, they buy the neighborhood the
house is in. Think about that...if you found the perfect house but it was in a
neighborhood that was not to your liking, would you make an offer on it? Most
likely the answer would be, "No."
So, you will need to make
another list of what type of neighborhood you want to live in. You will most
likely want to consider things like how living in the neighborhood will effect
your drive time to and from work, what amenities are offered (swimming pool,
tennis courts, park, etc.), and, if you have children who are attending school
or soon will be, what school district you will be in and how close the schools
are. You may even want to make two lists just like you did with your home
criteria.
Your agent can save you
time and money by taking the information from your list of needs and wants for
your home, your pre-approval, and your list of needs and wants for the
neighborhood and incorporating them into a broad search profile which will then
be narrowed down to specific areas dictated by the market in which you will be
looking. Your agent's experience in the local market will be an invaluable
resource during this step.
Home Search
At this point you will
have a good idea of what you can afford and what type of neighborhood you will
want to live in. Taking that information into consideration you are ready to
embark on your actual home search. If you don't know much about the city that
you are moving to you will most likely want to start your search by finding
neighborhoods that meet your criteria and then narrowing your search to
particular homes in the area.
There are a few ways to
go about doing this. You can access local publications highlighting available
real estate in the area, you can contact local Neighborhood Associations, visit
the local Chamber of Commerce, look on the Internet, and you can even drive
through neighborhoods that you feel would meet your needs. Driving around a
particular area looking for a home that is for sale is good because you can
actually see the house, but it can be very time consuming and very "hit or
miss."
Your agent can save you
time and money by keeping up-to-date on available properties that possibly meet
your criteria and your agent will screen these properties for you. You can
eliminate the haphazard searching through papers and the Internet and let the
listings come to you through your agent. Then, when you find one that you like,
your agent can arrange for you to walk through the property when it is
convenient for you.
Making an Offer
Now that you have found
the home you would like to purchase, it's time to make an offer. Taking into
account the recent sales of homes in that neighborhood which are similar in
size, quality, conveniences, and amenities, what are you willing to pay for the
home?
Make sure that you have
everything down in written form... no verbal agreements. Present the seller with
a written document detailing what needs to be done by both parties to execute
the transaction. The contract should protect the best interests of all parties
involved and should be comprehensive in nature. Once it is accepted by the
seller, it may be too late to make any changes, so make sure review your offer
thoroughly before submitting it. The contract, though not limited to this list,
should include the following:
- A legal description
of the property
- The offering price
- The down payment
- Financing
arrangements
- A list of fees and
who will pay them
- Amount of the
deposit
- Inspection rights
and possible repair allowances
- The method of
conveying the title and who will handle the closing
- A list of appliances
and furnishings which will stay with the home
- The settlement date
- Any relevant
contingencies
Remember that the
legalities of this phase are very important. If you have any questions or
concerns, they need to be addressed right away. After all, no one has ever said
at their closing, "I wish I had asked fewer questions."
Your agent can save you
time and money by making sure that your contract meets all the legal
requirements according to local and national guidelines. Your agent will be able
to expertly advise you on how to create an offer that will have the best chance
of being accepted. Also, your agent will ensure your financial position as the
buyer by including any necessary contingencies which would protect you if a
particular requirement is not met.
Negotiating to Buy
Once your offer is made
there may need to be some negotiating in order to reach an agreement. Keep in
mind that almost everything is negotiable when you are buying a house. This can
give you a great deal of leverage in the buying process, that is, if you have
adequate information and you use it in an appropriate manner. Some of the things
that you may have to negotiate on are:
- The price
- Financing
- Closing costs
- Repairs that need to
be done
- Appliances and
fixtures
- Landscaping
- Painting
- Occupancy time frame
The key to successful
negotiating is keeping in mind that the end result must make both you, the
buyer, and the seller happy. Otherwise, negative feelings will persist
throughout the remainder of the process and someone may walk away feeling that
they were not treated fairly.
Your agent can save you
time and money by representing your best interests and negotiating on your
behalf. Your agent should have the knowledge and expertise necessary to make
sure that your offer is accepted at the best price and terms possible for you.
Vendor Coordination
After your offer has been
accepted, the property will need a thorough examination. Working with your
lender, you may need to have a formal appraisal and a survey done for the
property designated in the contract. A property inspection, a foundation
inspection, and an environmental inspection may also need to be completed to
make sure that the property is up to the standards set forth in your written
agreement. If there are issues or inconsistencies brought to light during this
time, it may delay or even nullify the contract depending on the contingencies
set forth in the contract. Having these procedures done in a timely and
professional manner is a must. Investigate each vendor to make sure that they
are reputable and have a clean operational history.
Homeowner insurance is
another very important item that will need to be taken care of at this point.
Insurance experts recommend that you obtain insurance equal to the full
replacement value of the home. Unless you have insurance coverage on the home,
the closing can not proceed.
Your agent can save you
time and money by supervising the coordination of all necessary vendors and
serving as your advocate when working with each vendor. They will make sure that
the vendors have access to the property at the appropriate times to perform
their procedures and oversee the execution of those procedures on your behalf.
Your agent's experience in this area will be invaluable in making sure that
everything is completed on time and in a professional and legal manner.
Pre-Closing Preparation
As the closing date draws
near you will need to be in contact with the escrow company or closing attorney
and your lender to make sure that all the necessary documents are being
prepared. You will also need to confirm that the documents will be delivered to
the correct location so they can be reviewed and that they will be ready on the
appropriate date. At this point, you should find out what form of payment you
will need to bring to the closing for any unpaid fees. Make sure that your
payment is made out to the appropriate party.
Your agent can save you
time and money by coordinating the necessary documentation with your closing
officer. They can work with the closing officer as your consultant to insure
thoroughness, accuracy, and timeliness. Making sure that each document is ready
and available will enable you to have a quick, easy closing.
Closing
Closing is where
ownership of the home is legally transferred from the seller to the buyer. It is
a formal meeting in which most parties involved in the buying/selling process
will attend. Closing procedures are usually held at the title company's office
or lawyer's office. Your closing officer coordinates the document signing and
the collection and disbursement of funds.
In order for the closing
to go smoothly, each party involved should bring the necessary documentation and
be prepared to pay any related fees (closing costs). There may be more than one
form of acceptable payment for your closing costs so ask the closing officer
which form of payment will be required and to whom it should be paid.
Sellers sometimes pay for
a portion or all of the closing costs, depending on local market conditions,
terms of the purchase contract, and the seller's cash and timing considerations.
Any such concessions should be acknowledged in writing. Most lenders will allow
a credit from the seller to the buyer for the non-recurring closing costs.
However, they usually won't allow a credit that reduces the amount of the
buyer's down payment or any of the buyer's recurring costs, such as expenses for
fire insurance premiums, Private Mortgage Insurance (PMI), or property taxes.
Your agent can save you
time and money by being present at the closing reading the documents on your
behalf and answering any questions or helping to resolve any issues that may
come up. Your agent will also be available to manage any last minute or
unexpected details that come up.
Post-Closing
Congratulations on the
purchase of your new home! Now that you have taken ownership of the property you
will need to have your local services such as electricity, cable, and phone set
up. To do this online, click here. Also, you should already be aware of the
expenses that are typically associated with owning a home. Neighborhood
Association fees, landscaping costs, and annual taxes should be budgeted for
throughout the year to keep from getting into a financial bind.
Your agent can save you
time and money by helping you coordinate the set-up of these local services. No
doubt your agent already knows who the local vendors are for such services as
water and electricity, as well as others, so he or she can help provide you with
a list of contacts.
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