Home Buying Process : a checklist of general steps and information in home buying
So you’re ready to buy a house and you have no idea where to begin. Don’t let overwhelming information or confusing advice from Uncle Joe get the best of you. Here’s a simple test to see if you’re ready for the home buying process.
Good credit: You must have a credit score that’s acceptable to lender guidelines to buy a home. Many require credit scores in the 600s. If you don’t know your credit score, go to annualcreditreport.com and sign up for a free credit report, which you’re entitled to once per year. Review your report for any delinquent accounts. If you see anything you don’t recognize, hit the dispute button. If everything looks good, go ahead and purchase your credit score for very inexpensive, using a credit card. *You can also have a lender/bank run your credit for free.
Call a bank or mortgage broker for a Preapproval prior to beginning your home buying process. Be sure to specify you want to be preapproved. Prequalifications aren’t as accurate as Preapproval most times. If you’re not sure who to use, compare mortgage rates of local banks online. Many times, they’re comparable, but you may find some very good rates with Credit Unions. A real estate agent can also give you recommendations if you need a couple.
Make a Basic List
Part of the home buying process is keeping organized. Make a list. How many bedrooms do you require? Do you need a fenced yard? Do you entertain a lot and require a Dining Room? Are you a Chef, requiring extra cupboard space? Make a list of your top 5 must haves. Then narrow it down to 3. Then two. Keep in mind that you may find 3 of your must haves, but not necessarily in a neighborhood you love. If you’re that concerned about the exact neighborhood you want to live in, then be open to sacrificing a couple of your must haves, if the neighborhood is most important. However, if you’ll allow 4 or 5 towns in your search, you can likely find better search results to meet your criteria. If you have 5 must haves, and refuse to live anywhere else other than one town, it’ll be harder to meet your entire criteria list.
Call a Real Estate Agent
How do you choose a broker? You will want an agent with experience who takes the time to listen to you before and during the home buying process. An agent that rushes you off the phone or doesn’t return calls is probably not a good fit. An agent who makes you feel uncomfortable or pressured is not a good agent. You’ll know a good agent by how they treat you, respect your time, and truly appear to value you as a potential client. Once you find an agent, don’t expect them to know or figure you out quickly. Spend time with your agent and be open and honest about what you’re looking for. Never lie and say you have more to spend than you really do. If the agent asks you 20 questions, that’s a good sign that they truly are interested in your needs. If you begin to hear sales tactics, trust your instinct and ask questions. If you feel comfortable with your agent, continue a good, open and honest communication throughout the home buying process, and the agent will work even harder for you. Treat them with respect and you should feel them return the same.
Go House Hunting
Once the agent sends you homes to view, it’s time to pick your top choices. Make note of these top choices and tell the agent why they interest you most so he or she can become familiar with your preferences. Schedule a time for showings and keep in mind the following:
Don’t get your hopes up that you’ll find the perfect home in the first trip.
Don’t waste time at properties if you walk in and hate it. There’s no need to waste your or the agent’s time. If you really don’t like it, let the agent know why. He or she will make mental notes and you’ll be on to the next home.
If the agent makes suggestions on potential ideas for the house, take a moment to listen. Use your imagination. You may be able to make changes to the home in order to create it into what you want it to be, but sometimes all the vision in the world just won’t do the trick. Move along to your next option.
Make An Offer
You have reached one of the most important parts of the home buying process. Now isn’t the time to take your time. If you’ve seen several houses that you aren’t fond of, and you have finally found one you love, act quickly. This is not a fear tactic. Many people stall, try to play pricing games or dupe the broker into thinking they’re going to play hard ball, when secretly, they know they’ll be heartbroken if they lose the house to another buyer. Ask the agent if they recommend any particular negotiating strategies, if he or she found any issues that should be addressed, such as possible evidence of problems. If so, listen carefully and let the agent do what they are trained to do. Don’t waste time. Follow through and quickly present a good offer on the home. Once the seller knows you’re interested, you’re less likely to irritate them if you don’t stall. Don’t let emotions get the best of you. Negotiations can be a bit unnerving if you’ve become attached and really want the house. The more you want the house, the more serious you should be with your offer.
Q: “Is it true I should offer 25% off? I heard I can get good deals on foreclosures.”
A: No. Just….no. If you offer 25% off, it will in most cases be immediately rejected and you’ll not be taken seriously by either your broker or the home owner.
Obtain a home inspection, including interior, exterior, structural and mechanical. If the home has septic and well, get septic and water tests as part of your inspection. If there’s a basement, check for radon. Ask the inspector to also check for pests and insects.
Q: Can’t I just inspect the home myself? Or have my friend or family member do it?
A: If you or your friend or family member are/is comfortable with heating, ventilation, air conditioning, electrical, building codes, pest control, roofs, basements, septics, water testing, radon, and has structural expertise, then by all means, you’re welcomed to invite him to inspect the premises if it’s ok with the home owner.
Don’t Make Any Large Purchases
Making any large purchases will result in additional debt in your name. Don’t put any large purchases on credit cards until after closing. This includes appliances, furniture, etc. or anything that is several hundred dollars or more.
Signing contracts requires a downpayment, typically. If you have a good lawyer, they’ll answer any questions you may have about anything you don’t understand. Don’t feel foolish in asking questions.
Your bank will order an appraisal. The purpose is to be sure the home is valued for at least the amount you’re borrowing. You don’t need to, nor is it standard for you to attend the appraisal. The seller’s agent will set the appointment. Your bank will let you know usually fairly quickly if the house did not appraise at a price that is acceptable. If the appraisal comes in too low, there are a few options which are typical. 1) You must come up with the difference between the amount the house appraised at and the amount you want to spend. Or, 2) The seller must come down to the appraised value. Or, 3) If neither of you are able to budge, then your broker may request another appraisal or fight the appraisal by providing recently sold comparable properties and a report of his or her opinion of value, based on these comparable sales.
Your bank will request for you to obtain homeowners insurance prior to closing. Shop around for rates, and you might even consider asking your current auto insurance agency if they provide homeowners insurance.
Once your bank receives all of your documentation and your file has been approved by underwriting, you’ll be issued clearance to close.
Cleared to Close
You’re almost there! Once you set the closing with attorneys or your broker (if your state doesn’t use attorneys) you’re ready to do a final walkthrough of the home with your agent or broker, who will advise in what to look for. You’ll want to be sure there has been no major damage, and that everything looks as it should prior to your closing. If there are any major problems in the house, contact your attorney and advise them before closing. They’ll then be ready to handle and negotiate or settle any issues either prior to or at closing.
You did it! You’ve made it through and you’re ready to be a homeowner. Sign final papers at closing, obtain your keys, and enjoy your new home.
*This list should be used as a general guideline. If you have any questions, ask your broker or attorney. Sometimes snags come up in real estate transactions which are going to need to be dealt with by the professionals who are representing you. Be sure to stay positive, provide your information as quickly as you can once it’s requested by your lender, and work with all parties to ensure a successful closing.