As everyone knows, a house is not an impulse purchase; you can’t just waltz in and declare “I’ll take it!” Preparation is important. There is a home buying timeline. Here is a list of things you can do to prepare to make the process smooth.
Money is always the driving force. There is no pint in looking at $300,000 homes if you only qualify for $250,000. It’s always a good idea to get the numbers you’re working with before searching for homes: what is your price limit, what your down payment is going to be, what interest rate you can get, etc. A lot depends on your credit score (your history as a debtor) when your lender is pre-approving you for a loan.
You may need to clean up your credit. A lender can guide you on this.
You may need to save some money. You will need money for down payment and closing costs. A lender can guide you on this.
You do need to be pre-approving by a lender to make an offer. Or you need proof of funds if it is a cash offer.
There are cost that must be met prior to Close of Escrow (COE) and at COE
You will need to count in closing costs. In the hot market, like we are in right now, you cannot expect seller’s concessions toward closing costs. If you want that house, the closing costs are on you, the buyer. They are variable, but going usually around 1% of the purchase price.
Lender’s Title Insurance Policy*
Half of the Escrow Fee*
Home Inspection (you need this during the 10 day inspection period)
First Year Fire Insurance Premium
First Year Flood Insurance Premium (if applicable)
Pro-rated Property Taxes
Survey fee (if required) (prior to COE)
Homeowner’s Association Fees (where applicable)
Pro-rated HOA Dues & Miscellaneous HOA Fees
Appraisal (prior to COE)
Loan Origination Fee
Private Mortgage Insurance (for lower down payment)
*Actual fees determined by Sales Price and/or Loan Amount
Earnest money is one more expense you need to prepare for. Earnest money is showing your skin in the game. The more money you put in, the more serious you look in seller’s eyes. It all goes towards your down payment, or returns to you if the deal falls through.
It’s good to have home inspection done by licensed home inspector. But that is another cost to count in. It goes around $350, but can be lower or greater depending on the area home is in, specific inspector and on the home’s size and age. A termite inspection is also advised.
You need a trusted professional who is going to lead you through the very comprehensive and often exhausting process. She will set up goals and strategy upon your criteria and keep you informed and well educated.
Why is it hundred times better having your own Realtor to represent you and your interests than working with listing agent in so-called dual agency? First of all, listing agent is the agent representing the seller and owing him the fiduciary duties. He cannot reveal any information that will harm seller in the transaction. That’s not a broker you want for yourself. Your broker should be there to fight for your rights and for your benefit, to find a best deal for you and negotiate the best possible deal.
Find an Realtor who will represent you like representing her or his own interests.
A Realtor can help you find a lender to work with. So this can move up to step one. A Realtor has relationships with people she has worked with before and who do their job well.
Now comes the fun part…. the part many start with (which I don’t recommend). You really need to know where you can look financially.
Depending on your lifestyle you’re going to be more oriented toward downtown or less urban location. Your marital and family status would probably influence on the size of the home needed, if you have or plan to have kids maybe school rating will be important to you (though even if you don’t have and/or don’t plan to have them in the near future, it is wise to purchase home in a good school area for the greater resale potential). And of course price will be a factor. Shorter commute time to work may drive your search. Whatever you decide to pursue, your Realtor is here to navigate the search process.
Realtors have access to all new listings coming on the market, thanks to syndication with MLS (multiple listing service). It’s the greatest data base of active listings and mostly up-to-date listings. The only difference between Zillow and all other MLS associated websites is that you may find homes listed as available that are not available.
Your Realtor can create a custom search for you and adjust it if need be. Communication is key.
As soon as you feel like touring some home, your Realtor can open any of the home listed for sale with their active key. When I was home searching for myself I thought that only listing agent can show me the house I found, but later I discovered that my agent can show me any house I wanted to see.
There is home buyer etiquette you should be aware of.
I am always surprised to learn that people believe they can dial the seller’s number and tell him what price they are willing to pay. Things are going a little bit different.
It is not everything about the price. What about other conditions? Do you need time to get financing? Do you need something to be removed by seller or left in? Do you need to sell your home first before purchasing this property? So – everything needs to be in writing.
Your agent is writing the contract, so as any other contract he puts all of the conditions that apply. This is actually a purchase offer….it becomes a contract when both buyer and seller sign. Realtor usually puts 24 hours for offer before expires, but can be longer if it’s expected for seller to be out of town or needs more time for response.
If seller does not respond, offer is not accepted. If he responds, but he wants to change some of the conditions or change the price – this is called counteroffer and beginning of negotiations. It can be many counteroffers until making the deal that both sides are willing to accept. When the final accepted document is signed (remember – all offers and counteroffers need to be signed, electronically in almost all cases) is called a mutual acceptance and you have a purchase contract.
Depending on your contract, you’ll have some contingencies.
The first working day after mutual acceptance the Realtor will need to open the escrow and deposit the earnest money with the escrow company named in the contract.
The first 10 days are your inspection period. You will have a home inspection and a termite inspection. If you choose you may have a roofer or a HVAC professional inspect the home. you may have any kind of inspection you wish but you pay these professionals.
One more way to find information about home is in seller’s SPDS, Seller’s property disclosure statement and the home insurance history. These will be provided to you.
Your lender is ordering an official appraisal, that is another contingency (you are paying for that appraisal ).
One day prior to closing you have the right for final walkthrough to double-check everything is in condition when you first saw it.
You need to stay in touch with your lender and provide them what ever they need. The process depends on the loan and approval/closing will only happen when all the lenders needs/conditions are met.
This is not a time to quit your job. Do not make any major purchases….car, boat, house full of expensive furniture. This can change your credit and possibly make you not eligible for your loan….no loan no home. The lender will recheck your credit on closing day before wiring money….beware.
Make arrangements to have all utilities transferred into your name on the close of escrow day. The seller will have the utilities turned off that day.I once had a client forget to do this and had no power or water all weekend.
Have your mail forwarded. Reach out to all contacts with your new address.
Now you are watching for the escrow officer’s instructions about time and place for signing the documents and for wiring the money (closing costs and down payment).
I love to remind my clients to be extra careful in this step for fraudulent and false instructions of possible scammers. Do not wire money until escrow officer calls you, or you CALL him/her to make sure everything instructed is true. Wire fraud is happening and don’t let that happen to you. Always have phone number of your broker and escrow officer with you and call before wire.