Your Home Buying Process
Apply for a Loan
Unless you are paying cash for a property, you will need a home loan. There are many different types of loans to choose from and new programs being added and taken away every month so it is important to talk with a loan specialist about what is currently available and what loan is the best for your individual situation. Many factors go into choosing the type of loan including how long you plan on living in the home, how much money you have to put down on a property, what type of property it is, etc.
The loan application process takes about 45 minutes to an hour. Usually the fee upfront for the initial loan application is between $30-40 for the credit report inquiry. Other items you’ll want to give to the lender or mortgage broker are your SS#, income and debt information, retirement info, other real estate owned, money in savings, and the maximum amount you feel comfortable with as far as a monthly mortgage payment goes.
You’ll want to make sure the lender gives you a detailed break-down of loan fees and charges. Besides your loan charges, you’ll want to know what your closing costs will be and your estimated monthly payment is based on a certain qualifying sales price. Feel free to ask me for a the name of an experienced loan specialist to help you through this process.
Do You Need to Sell a Home Before Purchasing a New One?
If you own an existing home and need to sell it before purchasing a new one, you should consider placing it on the market before even beginning a home search. This may create an inconvenience, such as renting an apartment and/or moving twice. I will use my best efforts to coordinate finding you a new home and have both homes close at the same time to avoid any inconvenience. Still, it can be tough to have a simultaneous closing, especially if one of the transactions involves an estate, a short sale, or a 1031 exchange. These types of transactions can take more time and careful coordinating since there is a 3rd party involved.
You can make an offer on your new home subject to selling your existing home, which is called a “Contingent Offer.” Sellers do not favor these types of offers and buyers may lose a little of their negotiating power when making a Contingent Offer, which is another reason why it can benefit you to sell your existing property before you start looking for a new one.
Purchasing Your Home
When you find the home you want to purchase, we will help you make a written offer to the seller using an “Earnest Money Agreement.” You will need to put down an earnest money deposit, which is generally about 1% of the offer price. This shows the seller that you are serious about purchasing their home. There is generally some going back and forth with counter-offers before coming to a mutually agreed offer. If you get an offer accepted, you will most likely elect to do a 10 business day inspection period. During this time, you’ll want to do your research on the home including performing home inspections, finding out about building permits, checking on neighborhood/school information, and driving by the property at different times of day. In order to not risk losing your earnest money deposit, you’ll want to make sure you are sure about moving forward before removing your inspection contingency.
When the buyer and seller have come to written, mutually agreed upon offer, you will do your home inspections. There are a variety of available inspections you may want to do. Generally buyers spend between $400-1500 on their home inspections. Generally, the investment of your inspections is a non-refundable expense whether you stay in the transaction or back out.
If the buyer and seller agree on repair costs and the buyer removes the inspection contingency, the transaction moves forward. The next step is the property appraisal which costs the buyer about $450-500. The mortgage broker or lender hires the appraiser, which is a neutral party to the transaction.
Closing of Escrow
The Escrow Company is another neutral party involved in the transaction. Their role is to follow written instructions, received from the buyer and seller. “Signing” means that the Escrow Company has received all the paperwork necessary for the buyer and seller to sign their loan documents. This usually takes about an hour at the Escrow/Title Company. Once the buyer and seller sign their closing paperwork, the Escrow Office will coordinate the funding and recording of the transaction, which generally takes about 24 hours after the buyer has signed all the paperwork. Upon funding, the buyer is officially in title of the property and keys can be given, unless the seller is renting back a certain number of days after closing.
As always, please ask us if you have any questions along the way. Real Estate transactions can be tedious and confusing, not just for first-time buyers. Know that we are here to help!