1.
Define Your Needs For Your New Home
Congratulations on your decision to purchase a
new home! Your first step toward buying your new
home will be to analyze your needs. Your real
estate agent can assist in analyzing your needs
so that 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 and your
family.
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.
2. Get Pre-Qualified or Pre-Approved
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 prequalified or preapproved
for a mortgage.
Either way, you
will need to contact a mortgage company. There
are some key differences between
prequalification and preapproval 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
prequalified amount is based solely on the
information you provide. In most markets,
prequalified buyers usually hold little clout
compared to preapproved buyers due to the fact
that the information given during the
prequalification process is not thoroughly
investigated and therefore may be unreliable.
Where a preapproved buyer is actually approved
for a loan of a certain amount, a prequalified
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 preapproved 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 preapproved would be
more attractive to a seller than just being
prequalified.
3. Gather Local 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! 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 wasn't 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 affect 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 as you did with your
home criteria.
Your real estate
agent can help you consolidate the information
from your list of needs and wants for your home,
your preapproval, and your list of needs and
wants for the neighborhood. From this, you can
incorporate this information 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
local markets will be an invaluable resource
during this step.
4. Search For Your Dream Home...
At this point you will have a good idea of what
you can afford and the type of area you will
want to invest in. Taking that information into
consideration, you are ready to embark on your
property search. If you don't know much about
the city to which you are moving, you will most
likely want to start your search by finding
areas that meet your criteria and then narrowing
your search to particular properties in the
area.
There are a few
ways to go about this. Possibly the most
efficient way to find properties is to allow
your real estate agent to keep you up-to-date on
available properties that meet your criteria,
and then allow your agent to screen these
properties for you. When your agent presents you
with a property that interests you, he or she
can arrange for you to tour the property at your
convenience.
You can also
access local publications highlighting available
real estate in the area; contact and visit the
local Chamber of Commerce, look on the Internet;
and even drive through areas that you feel would
meet your needs. Driving around a particular
area looking for properties for sale is good
because you can actually see the property.
However it can be very time consuming and it is
a "hit or miss" process.
5. Make An Offer...
Now that you and your real estate agent 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? Your real estate agent will consult with
you and advise you on how to create an offer
that will have the best chance of being
accepted.
Your agent will
ensure that you have everything down in written
form... no verbal agreements. After consulting
with your agent to put your offer in a written
contract that meets all the legal requirements
according to local and national guidelines, your
agent will 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.
Your agent will also ensure your financial
position as the buyer by including any necessary
contingencies, which would protect you if a
particular requirement were not met. Once the
seller accepts it, it may be too late to make
any changes.
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."
6. Negotiate The Offer...
Once your offer is made, you and your real
estate agent may need to enter some negotiation
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. Your agent will
have the market knowledge and negotiating
expertise necessary to make sure that your offer
is accepted at the best price and terms possible
for you.
Some of the
things that you may have to negotiate 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.
7. Find The Vendors You Need
After your offer has been accepted, your agent
will supervise the coordination of all necessary
vendors and serving as your advocate when
working with each vendor. Your agent 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.
For instance, 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.
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. 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.
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.
8. Pre-Close Preparation
As the closing date draws near, your real estate
agent will contact the escrow company or closing
attorney and your lender to make sure that all
the necessary documents are being prepared, and
that they are complete, accurate, and delivered
in a timely manner. Your agent 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 for the appropriate
closing date.
At this point,
you and your agent 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.
Ensuring that
each closing document is ready and available
will enable you to have a quick, easy closing.
9. Closing On The Home
"Closing" refers to the meeting where ownership
of the property is legally transferred 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. Your agent will be
present at your closing to read the documents on
your behalf, answer any questions, or help to
resolve any last minute or unexpected details
that may come up.
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 made
out. Closing costs will generally total an
amount equal to 2 to 3 percent of the total loan
value, not including down payment and the
buyer's escrow account.
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, PMI, or property
taxes.
10. Post-Close Activity
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. Your real estate agent can help 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.
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.
