| The
Home Buying Process
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When it comes to purchasing a house,
many people believe they know the basics, but most don’t know the details involved.So, for less stress, let’s break it down, step
by step, so the process feels more manageable.
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1.
Determine what you want from a home purchase
Know whether you’re ready to buy a home. Make a list that outlines
each of your reasons, and use the Rent vs. Buy calculator; you may need it later if you get cold feet. If you’re trading up or down, or
if you’re a first-time homebuyer, make sure you thoroughly understand how the change will impact your lifestyle.
2. Identify What You Need in a Home
This
is important. Ideally, what you want to consider is what will suit you best. Consider the number of bedrooms and bathrooms for all the family
members, if you need a family room, proximity to work and schools, amenities the home and area will provide, the area's safety, and maybe even
the percentage paid for taxes. The better you’re able to identify what you need, the easier it will be when searching and not waste your
time in homes that won’t work for you. You’ll have a targeted focus that gets you straight to the home you want to live in.
3.
Determine Affordability & Where to Buy
This can seem like the most daunting part, but soon you'll be on your
way to a targeted home search. Start by getting rough idea of what you can afford. Don't be discouraged, a lender will often confirm that you
waulify for more than you think. Start by using our Mortgage Payment Calculator for an idea of affordability.
Now is also the time to research
prospective neighborhoods, and at this point, you most likely have already been looking at homes online. Physically drive by neighborhoods you’re
not familiar with, so you don’t take valuable time looking at homes in areas you won’t live in. After a couple of weeks previewing
neighborhoods before and after work, and weekends, you’ll have narrowed down your search areas.
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4.
Get Pre-Approved
Also, a good agent will have you begin the loan
process immediately. We're not talking about getting pre-qualified, we're talking about getting approved for a loan. This will put you in the
strongest possible negotiating position next to buying with all your own cash. In today's market, having your loan in place before making an offer
is mandatory. Most homes have multiple offers. Sellers are not even looking at offers for which the buyer does not have the loan in place.
The
property must also meet your Lender’s criteria for your loan type, so I’ll be sure we’re looking at the right homes for your
loan when it comes time to make visits.
I will show you properties and neighborhoods that meet your criteria, help you formulate a purchase
offer, and help you understand the disclosure laws pertinent to your purchase transaction. It’s a good idea to be armed with a list of features
your need, and another with those that you’d like to have.
As you look at listings online, email me the property addresses you
like, or ideally MLS numbers. I’ll check out each to be sure it meets your loan’s criteria for property condition, and is in fact,
still available. Often times there is a work-around when property issues arise, depending on your Lender’s flexibility and experience, and/or
your finances. I find that smaller, local direct lenders are much more easy to work with in this competitive market.
Organize Your Loan
Paperwork
But in this market, it’s customary for buyers to include their pre-approval letters with their purchase offer. Both banks
and private sellers alike want to know that you can get your loan; neither want to waste time in escrow only to have it cancelled because you
don’t qualify for the sale price.
Use this checklist to organize your paperwork before you find a home. It may be a boring task
today, but it’s better than a stressful and disheartening ordeal tomorrow.
• Your Social Security number
• Recent
paycheck stubs
• Last 2 years W-2's or 1099 DIV income statements (investment income)
• Last 2 years Federal tax returns (mandatory
if self-employed)
• Proof of other income, such as tips, Social Security payments, etc.
• Last 2 months Bank statements
• (should show a balance greater than the amount you’ll need for the down payment and/or closing costs.
• Last 2 months Investment account statements
• Last 2 months Retirement account statements
• Make and model of vehicles
you own and their resale value
• Credit card account information
• Auto loan account information
• Personal loan
account information |
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If you currently own Real Estate:
• Mortgage
account information
• Home insurance policy information
• Home equity account information (if applicable)
You may be
asked for additional documentation, but having these documents will surely speed up your application. Of course, the best way to avoid any delays
during the application process is to get preapproved. You’ll still need to gather these documents for the preapproval process, so set aside
a couple of hours and get it over with – you’ll be glad you did. If you’re divorced, or had a bankruptcy, let the lender know
now. Surprises like these in escrow can cost you big money and/or a cancelled sale.
5.Find
the Right Home
This is the first task your agent will perform for you, and it is probably the least important. Before
driving all over, your agent will conduct an interview to determine if you are ready, willing and able to buy a home. Don't take this personally,
the seller wants to know. Plus, you’ve already been pre-approved for a loan, so we know you’re able, so if you’re also ready
and willing to buy a home, the better price you’ll get.
It's funny how that works sometimes. I've shown people the perfect home at
the best price and they decided to wait. One day, one week, it didn't matter. When they finally decided to buy, that house is invariably gone,
they just weren’t ready.
If the first thing an agent wants to do is go look at homes, go find another agent. Driving willy-nilly
around the county is an exhausting experience. No experienced agent drives people around without a qualifying interview first. The agent will
inquire as to the details of the home you are looking to buy. This way the agent can bring you directly to the most suitable homes on the market.
You do want an experienced agent, don't you?
6.
Make an Offer
Once you've found a home that matches your criteria and budget, I will draft a written contract and
offer letter to the Seller with the purchase price, and our terms and conditions. We usually include an inspections contingency, and we prepare
for negotiations by outlining the concessions you’re willing to make and those that you won’t even consider. The list you made before
will come in handy when you’re involved in price negotiations. I will show you comparable homes in the area to ensure that your offer is
adequate and that you don’t pay more than you need to.
7.
Negotiate & Come to Agreement with Seller
If your offer matches all the conditions that the seller was seeking,
the offer has a good chance of being accepted. There's a lot of competition in this market, so each offer will be customized for each listing.
Often, the Seller will initiate negotiations with a counteroffer. At this point, price, financing terms, repairs, closing and move-in dates, and
other terms that each party may find important can be negotiated before an agreement is made. |
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8.
Your Offer is Accepted! Escrow Opens
The day that we receive all
of the contacts signed by the Seller is the day the Agreement is made. Day one of escrow starts the next calendar day, even if it's a weekend.
9.
Schedule the Inspection(s)
Most contracts provide that the buyer
may have the house inspected by professionals at his own expense. Typical inspections include contractor inspection (includes electrical, plumbing,
heating systems), roof inspection, swimming pool inspection, foundation and soil inspection. Pest (termite) inspections are commonly paid by the
Seller.
These inspections may reveal defects which were not evident to the Buyer, and which were not disclosed in the Seller's disclosure
statement. Depending upon the terms of the contract, the buyer may request the seller to either fix the defect, or provide funds so that the buyer
can correct the defect after close of escrow.
I have a list of professional inspectors I'll send to you, some with additional expertise
in areas you may want depending on the home you choose. You can also search for your own inspector on the CREIA web site. Scheduling the inspection
for day one of escrow will help you decide if you're going forward with the purchase, and if so, enables your Lender to schedule the appraisal
sooner.
10. Give
Your Good Faith Deposit to Escrow
You have 3 calendar days to get
your money to escrow. Ideally, you’ll hand-deliver a cashier’s check to the escrow office, but mailing it on day one is OK too. When
the Seller sees that you have your check into escrow on day one, it paints you in a very good light, which can benefit us later in escrow should
we need anything from the Seller. So, the sooner escrow has your deposit, the better!
11.
Have your Lender Schedule the Appraisal
If you decide to go ahead
with the purchase, have your Lender schedule the appraisal for as soon as possible
(it can eat up a lot of your allotted time in escrow).
If you find something out about the house you can’t live with, you’ll have saved the money for an appraisal, which can be pricey.
12.
Read All the Disclosures and Reports
You have an agreed upon amount
of time (this is one of your contingency periods) to make all of your discoveries about the property. Read all of the reports and disclosures,
complete all of your inspections, and contact the city of county for any other information you may need. If you find something you can’t
live with, you may cancel within the property contingency period and receive your good faith deposit back. |
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13.
The Preliminary Title Report
In California, the title of the property
is searched by a title company and a preliminary report is issued on the condition of the title, for the buyer's approval. The report also includes
such information as present ownership, legal description of the property, any existing liens or unpaid taxes, any easements, and other covenants,
conditions, or restrictions.
A policy of title insurance will usually be issued at close of escrow. A title insurance policy insures
the buyer's interest in his purchase, and the priority and validity of any loan. It is a contract to indemnify against loss through defects in
the title. Your title insurance officer can answer many of the frequently asked questions about title insurance, the report, and alternative ways
of holding title to property in California.
14.
Satisfy Your Lender’s Loan Conditions
The appraisal report,
and all other documents related to the loan and the property, go to the underwriter, who creates a list of conditions to meet before the Lender
will fund the loan. For example, this could be something that needs to be done with the house, or a document related to a past divorce. Since
most buyers finance homes, Lenders will require that different things be done to ensure they are not lending on a house that might not be livable
or have the ability to be resold. In addition, banks want to protect the investment made by both parties, so they will ask for home insurance
to be secured and the title from the seller to be clear.
15.
Sign Loan Documents
These documents will be sent to the title company,
and coordinated with escrow to prepare for you to close.
16.
Final Walk-Through
The standard time for this is within five days
of closing. We check to be sure everything is as it should be as per the contract.
17.
Close of Escrow
At last! One of the final steps is here and the
day that everyone has been waiting for. The final document signing usually takes place at the escrow office, or with a mobile notary, but wherever
it is, I will be there right with you! Financing details sometimes vary between lenders, but they will be able to guide you with final closing
statements, additional money you might owe, and details of how the transaction is being processed.
After the buyer and seller have complied
with all agreed-upon terms, escrow is "closed," and the deed is recorded with the County Recorder. The escrow company notifies the agents
that the title is recorded and on that day the property belongs to the buyer, at which point you’ll finally get the keys! There is no need
for a final meeting of the parties, since all documents had been signed prior to the close of escrow, and had been delivered to the escrow holder.
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| Cory
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