STEP 1 - DEFINE 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 help you determine exactly what
you want your new home to look like and how it
should function for you and your family.
First, write down why you are looking for a new
home. For example, are you currently renting and
would like to begin building equity? Maybe you
recently married and have outgrown your current
residence. Or, maybe you received promotion that
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 for buying your
home. Depending on your reasons for wanting a
new property 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.
Finally, you probably have a mental picture of
what your dream house looks like. Turn these
ideas into two lists: one should describe your
dream home and the other should list features
that are absolute must haves. In a perfect
world, your new home would fulfill both lists
100 percent, but it is more likely the two lists
will turn into a list of priorities, as you get
clearer about what you want and what is
available.
STEP 2 - PRE-APPROVAL VS. PRE-QUALIFICATION
Now that you know what you want in a home, you
need to find out what you can afford. There are
two ways to go about this: prequalification or
pre-approval for a loan. Either way, you can
contact your agent about choosing a mortgage
company. Prequalification is the simpler of the
two processes. It can even be done online or
over the phone. When you contact a mortgage
company, they will ask you for some basic
information about your finances ? how much money
you earn, your debt load, etc. They will take
this information and give you a rough estimate
of how much of a loan you might qualify for.
Pre-approval is more a more in-depth process.
The lender will perform an extensive check of
your finances including your credit rating,
whether or not you're a first-time buyer, what
your debt load is, how much money you have to
put as a down payment, etc. This figure will be
a much more reliable estimate of what you can
afford.
In most markets, pre-approved buyers are
preferred over those that are merely
pre-qualified. Being pre-approved lets the
seller know you have gone through an extensive
financial background check and there should be
no unexpected obstacles to you buying their
home.
STEP 3 - NEIGHBORHOOD INFORMATION
Now that you have your list of needs and wants
and know how much you can afford to spend, it's
time to look at some houses, right?! Well, don't
forget, 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?
You will need to make another list for the type
of area you want to invest in. Consider things
like drive time to work and major destinations,
amenities such as swimming pools, tennis courts,
parking, etc., area schools and the demographics
of the surrounding area.
STEP 4 - HOME SEARCH
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
home search. If you don't know much about the
city to which you are moving, you will want to
start by finding areas that meet your criteria
and then narrowing your search to particular
properties in those areas.
There are a few ways to go about this. Possibly
the most efficient way to find homes 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 them for
you. When your agent presents you with a home
that interests you, he or she can arrange for
you to tour it at your convenience.
You can find available homes by reading local
real estate publications, contacting local
Neighborhood Associations, visiting the local
Chamber of Commerce, looking on the Internet, or
driving through neighborhoods that 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."
STEP 5 - MAKE AN OFFER
Now that you've found your dream home, it's time
to make an offer. Your real estate agent will
help you determine the offer price by reviewing
recent sales of homes that are similar in size,
quality, and conveniences and amenities. Your
real estate agent will advise you on how to
create an offer that will have the best chance
of being accepted.
After consultation with you, your agent will
create a written contract with your offer that
meets all the local and national legal
requirements. This document details what needs
to be done by both parties to execute the
transaction. It should protect the interests of
both parties and will ensure your financial
position as the buyer.
The contract should include, but is not limited
to, the following:
- Legal description of the home
- Offer price
- Down payment
- Financial arrangements
- List of fees and who will pay them
- Amount of the deposit
- Inspection rights and possible repair allowances
- Appliances and furnishings that will stay with
the property
- Settlement date
- Contingencies
Remember the legalities of this phase are very
important. If you have any questions or
concerns, be certain to address them with your
real estate agent right away.
STEP 6 - NEGOTIATING TO BUY
Once your offer is made you may need to
negotiate with the seller to reach an agreement.
Keep in mind 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 things you may negotiate:
- Price
- Financing
- Closing costs
- Repairs
- Appliances and fixtures
- Landscaping
- Painting
- Occupancy time frame
Counter offers happen frequently. Remain in
close contact with your real estate agent so you
can quickly review any changes from the seller.
Remember...bargaining is not a winner-take-all
deal. It is a business process that involves
compromise and mutual respect.
STEP 7 - SERVICE PROVIDER COORDINATION
After your offer is accepted, your agent will
help you coordinate the activities of service
providers and serve as your advocate when
working with them. Your agent will make sure
these vendors have access to the property to
perform their procedures and will oversee the
execution of those procedures on your behalf.
One service you may need is a home examination.
An inspection of the property, the foundation,
and the surrounding environmental may be needed
to make sure the property meets 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.
Insurance is another item that will need to be
taken care of. Experts recommend you obtain
title insurance equal to the full replacement
value of the home. This kind of insurance is
purchased at closing and protects the buyers in
the unlikely event that the title to the
property becomes invalid. Homeowners insurance
protects against theft, fire and liabilities. It
often includes things such as bicycles,
furniture and jewelry. Flood insurance is
generally only necessary for flood-prone areas.
The federal government issues this kind of
insurance.
In addition to aforementioned types of
insurance, you may want additional assurance for
your new home. Home warranties are one way to
protect yourself after you buy. Warranties for
new homes protect against plumbing, wiring and
structural defects. Existing home warranties
cover things like major appliances and
structural problems.
Having these procedures done in a timely and
professional manner is a must. Investigate each
service provider to make sure they are reputable
and have a clean operational history. Your
agent's experience in this area will be
invaluable.
STEP 8 - BEFORE YOU CLOSE
As the closing date (otherwise known as
settlement or escrow) draws near you will need
to be in contact with the escrow company or
closing attorney and your lender to make sure
all necessary documents are being prepared and
will be delivered to the correct location on the
appropriate date. 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.
These days, buyers and sellers don't even have
to be in the same room to close a deal. Thanks
to computer automation, signed paperwork can be
delivered overnight to both parties.
STEP 9 - CLOSING ON A HOME
Closing is where ownership of the home is
legally transferred from the seller to the
buyer. It is a formal meeting that most parties
involved in the process will attend. Closing
procedures are usually held at the title
company's 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.
STEP 10 - POST-CLOSING
Congratulations on the purchase of your new
home!
Now that you have taken ownership of it you will
need to have your electricity, cable and phone
set up. Also be aware of typical homeowner
expenses such as Neighborhood Association fees,
landscaping costs, and annual taxes and budget
for them accordingly.
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