December 10, 2008

8 Steps to Purchase a Home

Step #1 – Meet with a financial institution for 3 reasons
  1. Learn about the lending institution and negotiate an interest rate. A difference of even half a percentage point can mean a huge saving over the life of a loan. For example, the difference in the monthly payment on a $100,000 mortgage at 8 percent vs. 7.5 percent is about $35 per month. Over 30 years, that's $12,600.
  2. Ask about all their fees (application fees, processing fees, etc.)
  3. Get a Pre-Approved Mortgage Commitment (in writing). Even before the house hunting begins, homebuyers need to determine how much they can afford. Mortgage companies or other lending institutions provide pre-qualified loan commitments. Sellers often don't take an offer seriously unless the prospective first-time buyer has some assurance of creditworthiness from a mortgage company.
Step #2 - Do Your "Home-work"
Be sure to check for listings, neighborhood information, and current mortgage information and home ownership services. The right amount of research will help you to better understand the marketplace and homes available in your price range when you're ready to work with a real estate professional.

Step #3 - Make a List of your Needs, Wants, and Dreams
To help make the home buying process a little easier, homebuyers should create a Home Search Checklist of the important features they want in a home. Location and the number of bedrooms and bathrooms are usually important. Other important questions to answer: Are there shopping centers, parks, and schools located near the home? Please refer and print off our Home Viewing Checklist that has been provided for your convenience.

Step #4 – Decide on How to search for a property
There are two basic ways to search for a home, either you search privately or hire a ‘buyer’s agent’. A buyer's broker or agent represents the buyer's interests and helps identify homes that are for sale and in the right price range. The broker also can help with such tasks as writing contracts, negotiating the asking price, and closing the purchase. There is normally no cost to the buyer for this service. Both Buyer Brokers and Sellers Brokers are paid from the seller’s proceeds. Make sure you know who is paying the Buyers Broker, you or the seller.
Step #5 - Make an Offer
Once you find the right house, make an offer. Make sure that your offer is conditional on at least two items:
  1. You're able to obtain adequate financing (if you haven't done so already), and
  2. You can cancel (at no cost) if the property doesn't pass the home inspection and the owner can't come to terms about how to fix the problem. Make a good faith deposit (to be held in trust), which is a check that you'll give your realtor or lawyer to indicate that you're serious about buying the house. The check will apply toward the sales price if the deal goes through; if not, you get it back. The focus of an offer mostly centers around price although there are other important factors to consider, sometimes more important that the price. These are things you should either decide on your own or consult with your lawyer or realtor. Here are some things to consider:
  • Irrevocable date: This is the time period you allow the seller to consider your offer.
  • Items included and excluded from the sale. Be specific and don’t assume.
  • Closing date (this is usually also the move in date)
  • Who pays for the survey if there isn’t one available. If there is a survey, take it to the bank and confirm with them that they will accept it)
  • Who pays the closing costs: Buyer or Seller (it is all negotiable)
  • The final walk through date: Usually the morning of closing.
Step #6 - Hire A Home Inspector
Making an offer contingent on an inspection by a registered home inspector can save thousands of dollars by avoiding unseen problems. Inspectors will check the house for any structural damage. In the contract with the seller, it should state any necessary repairs that must be made before closing on the house. Prior to closing, walk through the house and check that such repairs have been completed.

Step #7 - Buy Homeowners Insurance
Lenders require homeowners insurance to protect the new homebuyer's interests as well as their own. Shop around for the best rates.

Step #8 – The Final Walk-Through, Closing, and Move
Prior to going to closing, you and your agent may visit your future house. The ‘walkthrough’ provides a valuable opportunity to ensure that the property has been left in the condition that you agreed to and that the items have been left and that they are in good working condition. It is too late to deal with any problems after closing so make sure all parties have lived up to their obligation. Instruct your lawyer or title company to close once you are satisfied with the final walk through. The closing is where the seller and buyer sign settlement-closing papers to transfer the ownership of the home and all transactions are finalized. Your lawyer and/or realtor should discuss the closing documents with you so you completely understand the statements and the exact amount of money you need at closing.

As the real estate market is deep trouble right now, if buying a home is necessary, then you can take huge advantage of this buyer's market at present.