When you’re thinking of buying a house, it seems like there’s a LOT of things to worry about. You’ll need to deal with banks and agents and inspectors and all kinds of people. You’ll learn words like HUD and points and brokerage. You’ll be asked to produce pages and pages of documents, and then sign hundreds more. They’ll be legal warnings and contracts and deadlines. It seems like a tremendous undertaking – but it’s really not. All of things you’ll have to do are things you can do on your own, without having to get a law or accounting degree. A lot of it will be tedious, but some of it will be fun and exciting – and nothing will be too hard for you if you have a good team of professional to help you!
Here’s the basics of buying a home:
Get a notepad, and write out a list of what you’re looking for in a home. Spend some time on it – maybe every morning with some coffee at your kitchen table. Think about what you like and dislike about every home you’ve been in. Think about your dream home, and think about the bare minimum you’d accept in a home. Think about specifics – how big do you like rooms? Do you like ranch homes and hate bi-levels? Do you really need a soaking tub, or just want one? How about the yard – a big yard is great for parties, but stinks for yard work. What location works for your family when thinking of schools and workplaces – don’t forget kids grow and will end up in a middle school and high school. Don’t worry about looking at homes yet – nice homes with good pictures will get you excited, and you may overlook something you’d really like in a home. Just think on it a while, indulge your dreams, and put together a prototype of your perfect house. KEY TEAM MEMBER – YOU
It’s almost time to look at houses, but not yet! First, talk to a lender to see what kind of house you can afford, or if you can even buy right now (I’ve had clients who didn’t qualify for their loan after they’d found their perfect home – it’s a killer). Your lender will want to get some basic information from you, so you’ll be collecting copies of pay stubs, taxes and other personal financial documents. They will also run a credit report – don’t panic if it doesn’t come back with a perfect score. Depending on what the problems are, your lender will tell you what kind of limits there may be on what you can borrow, or what impact a lower score will have on your interest rate. They will also tell you two magic numbers – how much you are pre-approved for, and what you’ll be expected to contribute in closing costs. That’s great, because you won’t waste any time looking at homes that don’t meet your standards or you can’t afford. KEY TEAM MEMBER – LENDER
We can finally go shopping! Take your wish list from Step 1 and your pre-approval from Step 2, and start looking for houses. Now is a good time to cruise around on the internet to see what’s out there. You may find out that the home you’d like in the area you’d like is a little out of budget, so you’ll have to rein in your expectations. Or, you may find out that your budget exceeds your needs, and you can indulge in extras you’d like in your new home. Talk to agents, and find a good fit. Then you can work together to find houses to go and look at (which is the fun part!) Don’t necessarily reject everything they pick out – a good agent will know more about the market than you, and will be able to better read between the lines of the home’s marketing language. It will sometimes seems like a chore, but visiting houses can be fun – just try not to schedule too many in a day, because the houses will start to blend together in your mind and your memory will be a little skewed at the end of the day. Also, if you can, try not to take your little kids along. There will be plenty of opportunities to see the house before you move in, and a little kid quickly gets bored and into trouble on a home tour. KEY TEAM MEMBER – REAL ESTATE AGENT
Now you found a house – time to make an offer. You can find a good breakdown of what to offer on this blog under “Buyer’s Tips – How do I know what to offer on a house?” Your Real Estate Agent will provide you with comps for the home you’ve picked, and will work with you to find a fair price. And then, you’ll start signing paperwork. Different states have different forms, and different real estate companies will have some of their own for you to sign. Lots of it is legal-ese, and lots of it is boring. Make sure you take the time to understand what you’re signing – if you have an agent who just instructs you to “sign here”, back away slowly and find another agent. A home offer is a legal contract to purchase a home, and you need to be able to have questions answered and understand what your obligations are, and what you’re asking for from the Seller. Also, you’ll be discussing things like home inspections and loan terms. Don’t worry about the forms, just make sure you know what’s going on, so there’s no surprises during the process.
You’ll also need to pony up the Earnest Money – this is a small percentage of the purchase price of the home that’s deposited in escrow, and it will be counted against the price of the home. This is the Seller’s guarantee that you’re serious about buying the house. KEY TEAM MEMBER – REAL ESTATE AGENT
This is the step where you’ll wait, and then sign a quick piece of paper, then wait some more. Now is the time when the Seller will be reviewing your offer, and deciding if it’s good enough. If it is, then you can move on to the next step. If not, you’ll work with your Real Estate Agent to negotiate the terms of the sale so both sides are on agreement. Most often, it will be about the price. Sometimes, the price is okay, but the Seller wants other items changed, like timelines for closing, paying for a home warranty, or what personal property will stay with the home. You may go back and forth several times – make sure you pay attention so there are no surprises in the end. KEY TEAM MEMBER – REAL ESTATE AGENT
Once you have an offer that’s accepted on both sides, you have a deal! There are usually two things you’ll be spending time on – scheduling and attending home inspections, and working with your lender to get the loan approved.
You will be working with your Lender to get the house approved for a loan – since they’ve already gotten your financial documents, they’ll be concentrating on the house itself. They will want to have an appraisal done, and may require other inspections you haven’t done, like well tests or structural inspections. You won’t have to deal with the details, but make sure you’re available to your Lender – they may have questions about the house that need to be answered before you can get your loan. If you don’t have the answers, refer them to your Real Estate Agent – they will be able to answer them, or will be able to find the answers for you. KEY TEAM MEMBERS – REAL ESTATE AGENT, LENDER AND YOU
The other thing you’ll be working on are the home inspections. I recommend every Buyer get a home inspection – even the most skilled amateur will miss things a licensed home inspector will. You’ll have a deadline to get the inspection – make sure you stay on top it, because if you blow it, you’ll be accepting the home as-is. Once the inspection is complete, you’ll work with your Real Estate Agent to see what you want fixed, and what you can live with. This may set off another round of negotiations, as the Seller may not want to fix everything you want them to. Work with your Real Estate Agent and Home Inspector to make sure you understand the problems, and you can handle any minor repairs that may not be fixed prior to closing. KEY TEAM MEMBERS – REAL ESTATE AGENT, HOME INSPECTOR AND YOU
Now we wait. We’re waiting for a “clear to close” from the Lender (meaning they’re ready to loan you the mortgage money) and for the Title Company to make sure the Title to the home is “clean” (meaning the owners of the home are the true owners, and there aren’t any liens attached to the property that need to be paid off). There won’t be much for you to do in this process – just make sure you’re available to all parties to answer questions and address issues. Be patient, and just keep in mind we’re close to the end. KEY TEAM MEMBERS – REAL ESTATE AGENT AND LENDER.
This is it – closing. The loan has been approved, your financial position has been approved, the home has been approved, the title has been approved, just basically everything involved has been reviewed and approved by someone, and we’re ready to go. You’ll meet with your Real Estate Agent and the Seller and their agent, usually at the Title Company, and you’ll review some documents and sign your name a hundred times. Make sure you pay attention to the documents as they’re explained, and get answers to any questions you may have – this is your last chance to back out, so make sure everything is what you discussed with your Lender and your Real Estate Agent. If you have to bring closing costs, check with your Real Estate Agent a couple of days before the closing – they’ll be able to tell you what amount you need, and how it should be paid. Amounts over $10,000 usually need to be paid via bank transfer, so make sure you double check on this prior to closing. It’s also not a terrible idea to deposit a little more than you need to – your sale won’t close if you’re missing even a penny, and any amounts you overpay will be returned to you at the closing. KEY TEAM MEMBERS – REAL ESTATE AGENT, LENDER AND YOU.
Now that the house is yours, the worst part is here – moving. Moving is much more stressful and difficult than any real estate purchase. KEY TEAM MEMBERS – FRIENDS WITH MUSCLES AND FRIENDS WITH BEER
I know it seems like a nightmare of paper and money and phone calls, but if you attack a home purchase in an orderly way, it won’t be that bad. The most important part is having a team that you’re comfortable with, one that is available to you, patient, and will answer your questions. The process seems complicated, but it has been streamlined to be as easy as possible. Don’t sweat the stuff you don’t need to – your team is in charge of the paperwork in most cases, and you’ll really only have to focus on picking a home you love!
Looking to buy a home? Call or text me at 219-765-2062, or send an email to ericag@C21Affiliated.com to discuss a potential new home!