Steps To Buying a New Home
Buying a home is an exciting but often overwhelming experience, particularly if you are buying your first home. As your REALTOR®, I can help you through the home buying process and assure that you find the right home for you, at the right price for you. All home buyers have a number of concerns, all of which I can help you with:
Setting a Time Frame
There are a lot of variables in the home-buying process, which means the time it takes to find and buy your new home varies, too. With this most likely being the largest financial commitment of your life, it is imperative that we start with a plan. Do you have a home that you will need to sell before buying a new one? Are you currently in a lease agreement? Are you transferring for a job or moving due to your family growing? Every family is unique and requires a unique plan. I am here to help start your journey on the right track.
The Lending Process
Perhaps one of the most intimidating aspects of buying a home is the mortgage approval process. I’ll be here to help guide you through this, but there are many ways you can prepare early to make the process smoother. Start by meeting with several lenders. Getting several offers will allow you to compare loans and get the best deal. (Don’t forget to get estimates on closing costs.) A lender can also be a very helpful tool if spoken to early because most will help you improve your credit situation to improve your interest rates or amount that you are pre-approved for.
Determining How Much You Can Afford
A general guideline to consider is that most buyers purchase a home that costs about one and a half to two and half times their current annual income. For example, someone earning $50,000 a year might purchase a home for $75,000 to $125,000. Mortgage payments should be about 26-28 percent of your gross monthly income. Existing debt is also considered in the mortgage process, and total debt payments (car payments, credit cards, student loans, etc.) should not exceed 40 percent of your gross monthly income. Your Lender will use all of these things to tell you the amount you are pre-approved to use towards a home.
Finding a Home That Meets Your Needs and Wants
Before you start looking at properties, make a list of “must-have” features along with optional features you’d like to have. “Must-have” features may include the number of bedrooms and bathrooms you’ll need to accommodate your family, location (consider commute to work, which schools your children will attend, etc.), lot size and special needs (handicapped access, etc.). Optional features may include the architectural styling, bay windows, landscaping, etc. Having a clear idea of what you want in a home will help your REALTOR® find the perfect property for you.
Making the Offer
You have found the home you have been searching for! Now it is time to make an offer to the seller. This written contract will include all aspects of the sale, including:
- Address and sometimes a legal description of the property
- Sale price
- Terms — for example, all cash or subject to your obtaining a mortgage for a given amount
- Seller’s promise to provide clear title (ownership)
- Target date for closing (the actual sale)
- Amount of earnest money deposit accompanying the offer, and whether it’s a check, cash or promissory note, and how it’s to be returned to you if the offer is rejected — or kept as damages if you later back out for no good reason
- Provisions about who will pay for title insurance, survey, home warranties, termite inspections and the like
- A provision that the buyer may make a last-minute walk-through inspection of the property just before the closing and the repair limit on repairs the seller agrees to make prior to closing
- Date of Possession, whether it be before, at or after closing
- A time limit (preferably short) after which the offer will expire
- Contingencies, which are an extremely important matter and discussed in detail below
This written contract is the first step in the negotiating process and it is very important that you have a knowledgeable REALTOR® on your side. You will have a binding contract if the seller, upon receiving your written offer, signs an acceptance just as it stands, unconditionally. The offer becomes a firm contract as soon as you are notified of acceptance. If the offer is rejected, that’s that, and the sellers could not later change their minds and hold you to it.
If the seller likes everything except the sale price, or the proposed closing date, or the basement pool table you want left with the property, you may receive a written counteroffer, with the changes the seller prefers. You are then free to accept or reject it or to even make your own counteroffer.
Inspections and Final Negotiations
Every contract that I write is contingent at the very least on a home inspection. You have several options regarding the inspection but the one I never recommend is doing without the inspection. Your choices are to hire a professional inspector, inspect the property yourself or hire professionals in each field (i.e. Plumber, Electrician, Heat & Air, Pool Company, etc.). You can also choose to do several of these options. Once inspected, a form will be filled out with the requested repairs, or agreeing to buy the home as-is. The seller must perform these repairs up to the dollar amount of the repair limit written in the original contract. If the necessary repairs exceed the repair limit, the seller may choose to make the repairs or either party my legally get out of the contract. This means you are protected from buying a “lemon”. Once the seller has agreed to make the repairs and completed them, a final walk-through will be conducted shortly before closing to ensure that the repairs have been made properly and nothing has become damaged between the date of the contract and date of closing.
Closing
The day has finally come to sign all of the documents making the home yours! Don’t forget a cashier’s check for the amount due at closing. The final dollar amount will be provided the day before closing. I will be at the closing table to answer any questions and provide copies of all documents signed during negotiations for your records.
Educating yourself about the home-buying process is key to getting a home you love and can afford.
As your REALTOR®, I am here to answer any questions you might have and guide you through this process.
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