HOME BUYER’S GUIDE
The home buying process – a brief, step-by-step overview.
For most people, purchasing a home is the single largest investment, and debt. So it’s not surprising that the home buying process can evoke different emotions at different times. You’ll be excited and hopeful one moment, then turnaround and feel stressed and anxious the next. This can be especially true when there is more than one person in the decision making process. You may have different things in mind than your partner and not even realize it until you go and view homes for the first time. These things come into play whether you’re buying your first home, bought many homes or whether you’re in the market for an investment property or that perfect vacation getaway.
Moreover, never has the real estate market offered greater opportunities, or been fraught with more risks, than now. If you have purchased a home before but it was prior to 2007, all of the rules have changed so be prepared. There are many factors and decisions to make. That’s why, when buying, it’s crucial for you to have all the available resources necessary to make a well-informed decision, together with the time required to make complete use of them. That’s also why you should enlist the help of a trusted REALTOR® at Above Par Homes who’ll be able to provide you with expert consultation at each step of the buying process.
Generally speaking, finding and purchasing a home includes the following steps, some of which are examined in more detail throughout this booklet:
1. Define Your Goals, Research Your Options, Make Your Plans
Given that buying a home is such a big step, it is all the more important for you to educate and prepare yourself as much as possible in advance. This means clearly determining why you’re buying and what kind of home you’re looking for. If you are planning on financing your new home, realize that buying and financing a home are closely related. This means You will need to examine your current financial situation and projecting how much home you can afford.
Once you have answered these questions, even tentatively, you will be in a better position to research your housing and mortgaging options, as well as create an action plan and timelines for moving forward. Please don’t hesitate to contact us here at Above Par Homes to enlist the help of a qualified REALTOR® right from the start.
2. How an Above Par Homes REALTOR® Can Help
Buying real estate is a complex matter at the best of times, given that there are so many factors to consider and no two homes or
transactions are alike. However, with all the unique opportunities and potential pitfalls of the current market, it’s even more important for you to contact your Above Par Homes REALTOR® once you’ve definitely decided to buy.
In choosing a REALTOR® to guide you through the property search, financing, negotiation and transaction processes, you should consider our local market knowledge, experience and track record.
3. Get Pre-Approved For A Loan
It is highly recommended that you get pre-qualified for a loan before you start viewing homes with the serious intention of buying. With today’s market conditions no Seller will even accept an offer without a letter of pre-approval or proof of funds. It also is not in the best interest of a REALTOR® to spend the time with clients who may not be candidates for purchasing a new home. If you are not currently qualified, most lenders can assist you with getting on the right path to approval. The pre-approval process involves meeting with a lender and authorizing them to examine your current financial situation and credit history. On the basis of this examination the lender will provide you with a document that details how much you can borrow to buy a home.
You may want to consider looking online to see what different lenders offer, such as MortgageMatch.com, or contacting your local bank or credit union. Also, check with your Above Par Homes REALTOR® , he or she may have some preferred lenders to check with.
The benefits of pre-qualification include:
You’ll have information about what you can afford and be able to plan accordingly.
As a qualified, motivated buyer you’ll be taken more seriously when you make an offer on a home.
Lenders can tell you whether you qualify for any special programs that will enable you to afford a better home (particularly if you’re a first-time buyer)
Real estate financing is available from many sources, and our experienced REALTORS® will be able to suggest lenders with a history of offering excellent mortgage products and services.
4. View Homes And Select THE ONE
Simply put, the key to the home search process is knowing what you’re looking for. Among other things, that means distinguishing between “must-haves” and “like-to-haves”, and “absolutely nots”.
That said, here are a few recent facts about the search process that might put your experience in perspective:
Almost 92% of buyers use the Internet to search for homes
The typical buyer searches for 12 weeks and views 10 homes
87% of buyers utilize real estate agents in the search process
There are many benefits to starting the search process on our website, www.AboveParHomes.com . You can view many homes and their details, take video tours and access neighborhood info. This will also give you some idea on price ranges in the neighborhoods you would like to pursue. You can even save your searches for viewing later.
Once you have narrowed down your search, it is very important to personally view the homes. Whereas you may think that details look alike online, remember, photographs can be very deceiving. Some home photos look amazing but the home doesn’t project that in person while others may not look appealing but it’s really only how the photographer took the pictures. Details such as workmanship, design and layout can be difficult to convey through still photographs. Also, if you are with a professional and eagle-eyed Above Par Homes REALTOR® they will likely notice things you might miss, provide expert analysis, and act as an impartial sounding board.
5. Make An Offer And Negotiate With The Seller
Now that you’ve found the home you’d like to buy, it’s time to make an offer. Your local real estate association, working with legal counsel, has developed the contracts that are used for transactions in your area. These contracts enable you to specify a sale price and also include many clauses for specifying various terms of purchase, such as the closing and possession dates, your deposit amount, and other conditions. You should carefully review these clauses with your Above Parr Homes REALTOR® to ensure that they express your desired offer. In addition to drawing up the contract, your REALTOR® will be happy to address all your questions about the offer process. Once you’ve written the offer, your REALTOR® will present it to the seller and/or the seller’s representative. At that point, the process – given that a home’s eventual sale price is subject to supply and demand – will depend on the type of market you’re in. Generally though, the seller can accept your offer, reject it, or counter it to initiate the negotiation process.
Successive counter-offers, with deadlines for responding and meeting conditions, will be exchanged between you and the seller until a mutually-satisfactory pending agreement is reached or the negotiations breakdown. All of this will be facilitated by your Above Par Homes REALTOR®.
Negotiations can involve many factors relating to different market conditions, homes and sellers.
6. Secure Your Financing
Once you have a pending agreement, it’s time to go back to your chosen lender to finalize your mortgage details so you can close the deal. This means finalizing your down payment, interest rate, regular payment schedule and any other financial conditions associated with the closing.
As noted in the section on loan pre-approval, if you’ve already been qualified with a lender for a certain loan and home purchase, this phase of buying your new home should be a relatively straightforward matter that centers around finalizing the loan details and signing the mortgage papers.
As the old saying goes, ‘let the buyer beware’. Particularly in these times, when so many buyers are suffering the consequences of having not fully understood their financing decisions, it’s crucial for you to work with people you trust. In this regard, a REALTOR® at Above Par Homes can be a true friend for life.
7. Close The Deal
If you’ve efficiently taken care of everything connected with purchasing your new home, the experience of taking ownership will be a positive joy with no surprises. Key steps to the closing, also referred to as the “escrow” or “settlement”, include:
Getting a Title Search – an historical review of all legal documents relating to ownership of the property – to ensure that there are no claims against the title of the property. It is also necessary to purchase Title Insurance in case the records contain errors or there are mistakes in the review process.
The Final Walk Through – you’ll be given the chance to look at the home to make sure it’s in the same condition as when you signed the sale agreement.
The Settlement – typically, prior to the Closing Date you’ll go to the title company to verify and sign all the paperwork required to complete the transaction. The settlement will include paying your closing costs, property adjustments and transfer taxes. At that point, you’ll receive the property title and copies of all documentation pertaining to the purchase. Your title company will alert you before the appointment on how much money you will bring in. This must be in the form of certified funds.
Recording – typically the recording of all documents happens on the same day as Closing Day. Once your Above Par Homes REALTOR® has received word from the Title company that all documents have recorded they can they turn over the keys to you and you can start your moving process. Congratulations! You are now a homeowner.
When buying a home, it’s important to understand some of the key concepts and terms. Throughout the purchase process, your Above Par Homes REALTOR® will be available to explain any unfamiliar terms you encounter. That said, here is a short list of terms you’ll want to know:
Abstract Of Title– A complete historical summary of the public records relating to the legal ownership of a particular property from the time of the first transfer to the present.
Adjustable Rate Mortgage (ARM)– Also known as a variable-rate loan, an ARM is one in which the interest rate changes over time, relative to an index like the Treasure index.
Agreement of Sale– Also known as contract of purchase, purchase agreement, or sales agreement according to location or jurisdiction. A contract in which a seller and buyer agree to transact under certain terms spelled out in writing and signed by both parties.
Amortization– The process of reducing the principal debt through a schedule of fixed payments at regular intervals of time, with an interest rate specified in a loan document.
Appraisal – A professional appraiser’s estimate of the market value of a property based on local market data and the recent sale prices of similar properties.
Appreciation – The increase in the value of a property.
Assessed Value– The value placed on a home by municipal assessors for the purposes of determining property taxes.
Buydown – A subsidy (usually paid by a builder or developer) to reduce the monthly payments on a mortgage loan.
Closing– The final steps in the transfer of property ownership. On the Closing Date, as specified by the sales agreement, the buyer inspects and signs all the documents relating to the transaction and the final disbursements are paid. Also referred to as the Settlement.
Closing Costs– The costs to complete a real estate transaction in addition to the price of the home, may include: points, taxes, title insurance, appraisal fees and legal fees.
CLUE – A letter obtained from the Seller’s Homeowner’s insurance disclosing any claims made on the property over the last 5 years, or the length of time the Seller has owned the property if less than 5 years.
Conditions, Covenants, and Restrictions (CC and Rs) – The standards that define how a property may be used and the protections the developer has made for the benefit of all owners in a subdivision.
Contingency– A clause in the purchase contract that describes certain conditions that must be met and agreed upon by both buyer and seller before the contract is binding.
Counter Offer– An offer, made in response to a previous offer, that rejects all or part of it while enabling negotiations to continue towards a mutually-acceptable sales contract.
Conventional Mortgage– One that is not insured or guaranteed by the federal government.
Debt-to-Income Ratio– A ratio that measures total debt burden.It is calculated by dividing gross monthly debt repayments, including mortgages, by gross monthly income.
Down Payment– The money paid by the buyer to the lender at the time of the closing. The amount is the difference between the sales price and the mortgage loan. Requirements vary by loan type. Smaller down payments, less than 20%, usually requires mortgage insurance.
Earnest Money– A deposit given by the buyer to bind a purchase offer and which is held in escrow. If the property sale is closed, the deposit is applied to the purchase price. If the buyer does not fulfill all contract obligations, the deposit may be forfeited.
Encumbrance– Any claim attached to real property that may lessen its value or impair its use.
Equity– The value of the property, less the loan balance and any outstanding liens or other debts against the property.
Easements– Legal right of access to use of a property by individuals or groups for specific purposes. Easements may affect property values and are sometimes part of the deed.
Escrow– Funds held by a neutral third party (the escrow agent) until certain conditions of a contract are met and the funds can be paid out. Escrow accounts are also used by loan servicers to pay property taxes and homeowner’s insurance.
Fixed-Rate Mortgage– A type of mortgage loan in which the interest rate does not change during the entire term of the loan.
Home Inspection– Professional inspection of a home, paid for by the buyer, to evaluate the quality and safety of its plumbing, heating, wiring, appliances, roof, foundation, etc.
Homeowner’s Insurance– A policy that protects you and the lender from fire or flood, a liability such as visitor injury, or damage to your personal property.
Lien– A claim or charge on property for payment of a debt. With a mortgage, the lender has the right to take the title to your property if you don’t make the mortgage payments.
Market Value– The amount an able and willing buyer would pay a willing seller for a home. An appraised value is an estimate of the current fair market value.
Mortgage Insurance– Purchased by the buyer to protect the lender in the event of default (typically for loans with less than 20% down). Available through a government agency like the Federal Housing Administration (FHA) or through private mortgage insurers (PMI).
Possession Date– The date, as specified by the sales agreement, that the buyer can move into the property. Generally, it occurs on the same day of the Closing.
Pre-Approval Letter– A letter from a mortgage lender indicating that a buyer qualifies for a mortgage of a specific amount. It also shows a home seller that you’re a serious buyer.
Principal– The amount of money borrowed from a lender to buy a home, or the amount of the loan that has not yet been repaid. Does not include the interest paid to borrow.
Purchase Offer– A detailed, written document which makes an offer to purchase a property, and which may be amended several times in the process of negotiations. When signed by all parties involved in the sale, the purchase offer becomes a legally-binding contract.
SPDS– Seller Property Disclosure Statement. A detailed disclosure by the Seller of everything they know about the property.
Title– The right to, and the ownership of, property. A Title or Deed is sometimes used as proof of ownership of land. Clear title refers to a title that has no legal defects, whereas a cloud on the title indicates something that needs to be cleared.
Title Insurance– Insurance policy that guarantees the accuracy of the title search and protects lenders and homeowners against legal problems with the title.
Truth-In-Lending Act (TILA)– Federal law that requires disclosure of a truth-in-lending statement for consumer loans. The statement includes a summary of the total cost of credit.
Title Search– A historical review of all legal documents relating to ownership of a property to determine if there have been any flaws in prior transfers of ownership or if there are any claims or encumbrances on the title to the property.