Steps in the Buying Process - Deciding to Buy
- Choosing a Buyer Agent
- Choosing a Lender
- Shopping for a Home
- Making and Negotiating the Offer
- Getting Inspections and Appraisals
- Going to Settlement (Closing) and Beyond
This process can be frightening to even the most financially saavy person. I bought my first home at auction before it was built. With every penny I had to my name at stake, I held up my auction number and heard a loud "Sold" shouted out by the auctioneer. Within 30 seconds, a gentlemen came and introduced himself as a preferred lender and asked that I follow him to discuss my financing options. It felt like the ground was shaking under my feet, and I had absolutely no clue what I'd gotten myself into. That house turned out to be the investment of a lifetime. After buying and selling many more houses, I decided that I wanted to reach out to buyers to be there to explain the buying process so they could actually enjoy their home purchase experience rather than be petrified in face of all of the details. As your agent, I will not talk in language that's over your head. Instead, I will explain the process in great detail and answer all your questions as many times as you need to hear those answers. 1. Deciding to Buy Your decision to buy is an important one because it has long-term effects. Some of the reasons you might decide to buy a home now include financial advantages, the security of knowing what your payment will be, and wanting a place that's your own. There are also significant tax advantages because, in most cases, your mortgage interest is deductible. In addition, when you sell, if you have lived in the home two out of the last five years, up to $250,000 in profit ($500,000 for married couples) is also tax-free. Your first step as you prepare to buy a home is to get a copy of your credit report. You are legally entitled to annual free copies from all three major credit bureaus. Just visit http://www.annualcreditreport.com/ Once you are satisfied that your credit is accurate, organize your financial records--pay stubs, tax returns, etc.
Begin learning about the market by reading my newsletters. They will help you monitor market conditions. For additional help in determining how your individual financial situation affects your ability to buy, contact me to talk through the specifics, including how to calculate whether you should buy or continue renting. 2. Choosing a Buyer Agent The most common buyer complaint is that their agent is not very responsive. Finding a buyer's agent who returns your calls promptly and is available to answer your questions is vital. Test an agent's responsiveness--it should be evident immediately. A good agent works to ensure you understand the entire transaction--from the decision to buy, to choosing a home, all the way through settlement. Make sure your agent--and not some subordinate team member--will be there every step of the way. When you interview agents, get answers to these questions: - Is the agent a full time agent?
- Is the agent well educated and trained?
- Does the agent have business experience? Negotiation skills? Training in marketing?
- Does the agent seem responsive?
- Do you feel comfortable with the agent?
Don't select an agent because he/she claims to be the "neighborhood expert." You want an agent who knows lots of neighborhoods and can help you find the best one for you! Finally, first-time buyers often don't know that buyers don't usually pay for an agent's services. All agents are paid by the seller at the rate negotiated at the time the home is listed. Contact me to discuss other misconceptions about commissions and other charges. 3. Choosing a Lender
A good agent has a team of lending professionals to recommend. I work closely with Steve Arsenault and Weichert Financial Services because I am confident that my clients will reserve the highest level of service and the most advantageous loan program for their specific needs. You don't have to use the lender your agent recommends, but be sure to discuss your choice with your agent. Keep the following in mind: - Some lenders focus on one or two products (e.g., ARM loans or fixed rate loans).
- Some loans are advantageous if you plan to stay in the property only a short time (2 to 7 years); others are better for longer terms.
- If you have good-to-excellent credit, larger national lenders will usually offer the most competitive rates.
- Most lenders will quote you a rate over the telephone without requiring that you submit a formal application.
- Choose a lender you trust to advise you--there are many loan packages and options available. You want someone who will take the time to guide you through the possible scenarios and options.
A lender will provide a rate quote, points, and a Good Faith Estimate (GFE) of closing costs. I review the GFE carefully with my buyers. You can also ask the lender which line items he/she actually controls (e.g., Lender Costs), and which are driven by other factors (e.g., Prepaids, Escrows, Title Insurance, etc.). Most closing costs are negotiable. 4. Shopping for a Home As your agent, I will meet with you to discuss your price range and what you are looking for in a home, and help you understand the trade-offs among price, location, and condition. As I gather information about you and and what you are looking for, I can suggest alternate housing types and neighborhoods. I will arrange to send you listings that appear to meet your requirements and will work with you to choose homes to visit. I will also send you open house listings that meet your criteria so that you can visit these homes on your own, and may also arrange private viewings of homes. Because there are so many options for conducting your search, contact me for a buyer consultation to determine how we could best work together. 5. Making and Negotiating the Offer Only 5% of offers are accepted! Preparing a successful offer demands an agent who understands the many elements other than price that are part of your offer. Contingencies, settlement dates, escalations, inspections, rent-backs, are just a few. A thorough market analysis by your agent will help decide what price you should offer, but it's also important that he/she discuss the strategy that underlies your offer. In these volatile times, it's critical to have a trusted, knowledgeable agent, to guide you in making such a large investment. Along with your offer, you will write a check for your "earnest money deposit"-a show of good faith that you plan to complete the transaction. This money is held in reserve (escrowed) until settlement. At that point, it is applied to your down payment and/or closing costs. 6. Getting Inspections and Appraisals Once all parties agree on the terms of the contract, any contingencies in the contract begin. Depending on the terms of the offer, contingencies may include a bank appraisal, home inspection, termite inspection, radon inspection, a period to review condominium or home owners association documents, and a variety of others. Make sure your lender has all the information needed, arrange for hazard insurance, and arrange to have the utilities turned on for the day of settlement so you can do an effective walk-through. See a Virtual Home Inspection Home Appraisals 101 7. Settlement (Closing) and Beyond On settlement day, we will take a final walk through the home before signing the final documents. The purpose of the walk through is to be sure that the property is in the same condition as it was when we wrote the contract and all items negotiated in any inspections were corrected/repaired according to the contract. We will also turn on all faucets, and test all appliacnes to be sure that they are in working order. At settlement, you sign your loan paperwork, provide the balance of your downpayment (after the earnest money is applied) and closing costs, and receive keys to your new home. Your lender may attend the settlement meeting, and a good agent always attends.
Settlement costs include title insurance, attorney's fees, recording and transfer taxes, prepaids, escrows, and other charges. About 2-3% of the purchase price is a good estimate for closing costs. You will receive a statement called a HUD-1 spelling out all costs associated with the transaction and the settlement agent will review these with you. This HUD-1 will be the final estimate of closing costs. I suply a sample HUD-1 form to all clients so that we can go through it together. The last thing that I want in a transaction is for my clients to have any confusion and/or concerns at the settlement table.
Begin on Day 1 to keep good records so you can take advantage of all the new tax breaks you are now entitled to!
Finally, if you're planning some remodeling or other projects, check out Best Home Remodeling Projects |
