Purchasing a property is most likely the biggest financial decision you will ever make. Whether this is your first purchase or you are an experienced buyer, this decision must be made carefully. Working with an experienced realtor, can help you navigate the processes successfully and most effectively.
Why Do You Want To Buy?
Are you tired of paying rent and want to pay your own mortgage and not your landlord’s? Have you outgrown your current home? Are you looking for an investment portfolio? Are you looking for a rental property? Would you like a larger yard? Would you rather live in a different area? Do you want to shorten your commute? Do you need to relocate for work or family?
Having a clear sense of your reasons for buying and the critical deciding factors will help you choose the right property for the right reasons.
Eight Steps to Buying a Home or Investment Home
- Your Reason/Decision to Buy
Although there are many good reasons for to buy a home or investment, wealth building ranks among the top of the list. Home ownership has been described as the best “accidental investment” most people ever make. When it is done right, home ownership becomes an “intentional investment” that lays the foundation for financial security and personal choice. There are solid financial reasons to support your decision to buy a home, and, among these, equity buildup, value appreciation, and tax benefits stand out.
Base your decision to buy on facts, not fears. Buying a home doesn’t have to be complicated. There are experienced professionals who will help you along the way.
- Find your agent
The typical real estate transaction involves at least two dozen separate individuals-insurance assessors, mortgage brokers and underwriters, inspectors, appraisers, escrow officers, buyer’s agents, seller’s agents, bankers, title researchers, and a number of other individuals whose actions and decisions have to be orchestrated in order to perform in harmony and get a home sale closed. It is the responsibility of your real estate agent to expertly coordinate all the professionals involved in your home purchase and to act as the advocate for you and your interests throughout.
Your agent will:
- Educate you about your market
- Analyze your wants and needs
- Guide you to homes that fit your criteria
- Coordinate the work of other needed professionals.
- Negotiate on your behalf
- Review paperwork and deadlines
- Solve any problems that may arise
- Secure financing
While you may find the thought of home ownership thrilling, the thought of taking on a mortgage may be downright chilling. Many first-time buyers start out confused about the process or nervous about making such a large financial commitment. You should consider the following steps for your financing and understanding what your budget is for your new home:
- Choose a loan officer or mortgage specialist by talking with several, obtaining a referral, contacting your bank.
- Make a loan application and get preapproved. This allows you to understand your budget and monthly mortgage costs.
- Determine what you want to pay and select a loan option. Be sure to review all closing costs and fees with your lender to avoid surprises.
- Submit to the lender an accepted purchase offer contract.
- Get an appraisal and title commitment.
- Obtain funding at closing. Work closely with your lender to understand all fees they will collect.
- Find your home
Looking for your home begins with carefully assessing your values, wants, and needs, both for the short and long terms. You should evaluate the areas you are considering and what is on your must have list with some of the following questions:
- How much space do I need and why?
- Which is more critical: location or size?
- What do I want my home to be close to? Transportation, entertainment, schools, water access, shopping
- Would I be interested in a fixer-upper? How much work can I truly do and afford? What experience do I need to make it work?
- How important is home value appreciation?
- Is neighborhood a priority?
- Would I be interested in a condo? What do I need to think about condo fees?
- Would I be interested in new home construction?
- What features and amenities do I want? Which do I really need?
- What is my timeframe?
Be patient, finding the right home can take time. This is not television. Not everyone picks a home after looking at just three!
- Make an offer
When searching for your dream home, you were just that-a dreamer. Now that you’re writing an offer, you need to be a businessperson. You need to approach this process with a cool head and a realistic perspective of your market. The three basic components of an offer are price, terms, and contingencies or conditions.
Price-the right price to offer must fairly reflect the true market value of the home you want to buy. Your agent’s market research will guide this decision.
Terms-the other financial and timing factors
Conditions/Contingencies – such as:
- Conveyances-the items that stay with the house when the sellers leave.
- Schedule-a schedule of events that has to happen before closing – inspections, financing, purchase & sales date.
- Closing costs-it’s standard for buyers to pay their closing costs, but if you want to roll the costs into the loan, you need to write that into the contract.
- Home warranty-this covers repairs or replacement of appliances and major systems. You may ask the seller to pay for this.
- Earnest money-this protects the sellers from the possibility of your unexpectedly pulling of the deal and makes a statement about the seriousness of your offer.
- Perform due diligence
Unlike most major purchases, once you buy a home, you can’t return it if something breaks or doesn’t quite work like it’s supposed to. That’s why homeowner’s insurance and property inspections are so important.
A homeowner’s insurance policy protects you in two ways against loss or damage to the property itself and liability in case someone sustains an injury while on your property. You will need to coordinate homeowner’s insurance prior to the purchase.
You will be given a certain amount of time to have a home inspection on your property to discover any unknowns about the home so you know exactly what you’re getting into before you sign your closing papers. See Facts for Consumers on Home Inspections
Your inspector will review the structure, all major systems and areas that need to be addresses. If you have a big problem show up in your inspection report, you should bring in a specialist. If the worst-case scenario turns out to be true, you might want to walk away from the purchase or need to negotiate a repair or price concession. Remember, perfect homes are few and far between and most homes will have small items you will need to address.
The final stage of the home buying process is the lender’s confirmation of the home’s value and legal statue, and your continued credit-worthiness. This entails a survey, appraisal, title search, and a final check of your credit and finance. Your agent will keep you posted on how each if progressing, but your work is pretty much done.
Your preclosing responsibilities include:
- Stay in control of your finances.
- Return all phone calls and paperwork promptly.
- Communicate with your agent any changes or concerns.
- Several days before closing, confirm with your lender and agent that all your documentation is in place and in order.
- Obtain certified funds for closing.
- Conduct a final walk-through.
On closing day, with the guidance of a settlement agent and your agent, you’ll sign documents that do the following:
- Finalize your mortgage.
- Pay the seller.
- Pay your closing costs.
- Transfer the title from the seller to you.
- Closing attorney or closing agent will make arrangements to legally record the transaction as a public record.
- Protect your investment
Remember it is important to protect your investment with routine maintenance on your home’s systems, depending on their age and style. Watch for signs of leaks, damage, and wear. Fixing small problems early can save you big money later.