Resources for Buyers
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Steps to Buying a Home
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Home Buying Benefits
There are many benefits to owning a home that every homebuyer should know about and take advantage of. If you were to boil down all the benefits, the top three most important tend to be tax savings, appreciation, and equity.
Many payments on your home may be tax deductible. Reach out to a tax attorney or a certified public accountant for more information.
The appreciation of a home's value almost always outpaces the increases in inflation, making it a worthwhile investment. Inflation tends to increase an average of 3.2% per year, while real estate investments tend to appreciate over 5% per year.
Paying down your principal and appreciation in value allow you to gain equity in your home, which can become a great savings plan, as it is something that you can borrow against.
In addition, there are several programs in which you can purchase a home for little to no money down. I can connect you with local lenders for more information.
Once you have decided you are interested in purchasing a home, it is time to find your Realtor®.
In a brief presentation, we will discuss your goals, your dream home, a little about me and what my team can do for you, current market trends, current interest rate trends, and lending process information. You will also be provided with a Home Loan Toolkit and some other helpful documents to assist with the loan process.
Questions to Ask Your Real Estate Agent
Your home is your biggest investment and your most cherished possession, so no one should judge you for making sure you are choosing a real estate agent who is proven, knowledgeable, and has a philosophy that you agree with.
Take the time to look up their reviews online from past customers. Websites like Zillow do not allow peer reviews, so it is a helpful tool in deciding who should represent you.
Take a look at the agent's website. Is it professional? Does it contain good information? Take a look at their past sales and current homes. Is their track record solid?
Then take a moment to think of some thoughtful questions that are important to you.
If you want something done, ask a busy person.
- Are you full-time or part time?
- What are the current market conditions?
- What is going on with interest rates?
- How many local service providers can you connect me with?
- How well do you know the area?
- Do you have an assistant or team?
- Who will I be working with primarily?
- What separates you from your peers?
- How many clients are you representing right now?
- Besides offer price, what are some other ways to make my offer more attractive?
- What percentage of your clients are buyers versus sellers?
- Typically, how quickly can we see a home?
- What is your process to determine a fair offer price?
- Are you part of any community groups/ attend community meetings?
- What method of communication do you prefer and how available are you?
Preparing for the Loan Process
There are many things you can do to help you prepare for the mortgage loan process. One of the most important things is to create a budget to help you decide how much you would like to spend.
You could also work on decreasing debt, saving for a down payment, improving your credit score or maybe even asking for a raise at work.
Most importantly, do not make any large financial decisions - changing jobs, buying a car, or opening new lines of credit.
Also, start collecting documents such as W2s, pay stubs and account statements. Your real estate agent and lender can guide you through what will be needed.
Applying for a Mortgage Loan
An investment in knowledge pays the best interest.
If you are looking to finance your home, you may find it difficult to navigate all of the financing options, so we take the time to help you coordinate with some local lenders to assist with the process. There are a variety of loan types, so it is important to take your time and fully understand, without any pressure, what the terms of each option are.
Some of the most important equations of this process are the qualifying ratios. These are ratios calculated by the lenders to determine the loan amount you would qualify for, by comparing your total debt to your total income. These ratios are designed to protect both the lender and borrower from the risk of default. Qualifying ratios and many other factors play into the interest rates quoted.
We highly suggest you request a "Cost Estimate" from each lender for easy comparison. Shop the lenders and let each of them know why you chose another lender, in case they can make any adjustments in your favor.
Another service we offer our clients is compiling all your Loan Estimates into a single spreadsheet for easy comparison. This way you can see where certain figures may be higher or lower. It's a great tool when the process becomes overwhelming.
Generally, "prequalified" and "preapproved" are terms that are used interchangeably, but the small difference is that you are prequalified before the review of your financial documentation and preapproved after the verification of your financial documentation. Understand this is not a guarantee of a loan. The more important point here is this part of the process will help you know what you can afford.
In addition, a prequalification can be required by some sellers in today's competitive real estate market, so it is always nice to have this to attach to an offer to show you are ready to make a deal.
Questions to Ask Your Lender
Sometimes questions are more important than answers.
We always say that you want to choose a lender who makes you feel like you are the priority - one who is knowledgeable, communicative, and patient throughout the process. Another great idea is to know what to ask a lender, so you are fully informed and make the best decision possible.
- What types of mortgages do you offer?
- Which would you recommend for me?
- Are any of your fees negotiable, or are there any special promotions?
- How much is Private Mortgage Insurance?
- What are your escrow requirements?
- Is the loan and/ or its servicing transferable to another company?
- Can the interest rate be locked in?
- What if the rates drop during this period?
- How much will I be paying total over the life of this loan?
Prepare for House Hunting
Once you have your budget or prequalification, feel free to look around to see what is realistic for this price range.
Also know that there is no answer to the question, "When is the right time to buy?" Only you will know the answer to this question, and you will want to be well-informed and comfortable with anyone representing you in this endeavor.
Distinguish your "wants" from your "must haves" before you start house hunting. In today's competitive market, if you do find the perfect home, be prepared to make your best offer. We are seeing many multiple offer situations this year.
Due to these common multiple offer situations, it is best to not negotiate yourself out of the deal. It is understandable that everyone wants to feel like they are getting a bargain, but too much negotiating may cause you to lose a home.
Also, try not to get wrapped up in everyone else's opinions. It is natural to want to ask friends and family to get reassurance about such a big decision, but be sure you are focusing on the best decision for you and your family.
Your Home Search
We use a great tool called Collaboration Center, an application directly linked to the Multiple Listing Service, where real estate agents input all of their properties. With this platform, you are notified in real time of new homes for sale, which can be more accurate than 3rd party websites like Zillow, Trulia, and Realtor.com.
Once you have given us the criteria for the property you are looking for, you will get instant notifications of all properties fitting this description. You can then sort these homes as favorites, possibles, or rejections, so we can see in real-time those you may be interested in scheduling a time to go and see. If one of these categories is not to your liking, you can even add a comment, so that we may be able to better tailor the search to your needs.
Collaboration Center also allows you to compare properties side-by-side or even sort properties with filters. These are both extremely helpful ways to view potential properties in an effort to narrow down your search. You can even see which of the homes will be hosting an open house this weekend. My team checks this system daily so we can touch base with you on your home search.
Once you have several homes you are interested in seeing, we will take the time to individually schedule each showing, and map out the best route to visit the homes with you.
Making an Offer
So you are ready to make an offer? Great! At this point we will create a Comparative Market Analysis on the home of your interest to determine the best offer price. We will then meet to begin reviewing the Purchase and Sales Agreement Contract. This document includes information like the price offered, financing terms, earnest money deposit, escrow details, closing date, and possession date.
The earnest money deposit is most often 1% of the purchase price, and can be delivered on the contract date, or up to a few days after. It is deposited into an escrow account until the closing date at which point the money is applied to your costs.
This contract will likely also have contingencies based on the satisfaction of the inspection, appraisal, or financing. It is pertinent that you fully understand your offer before signing it, so we will take our time to review each clause in detail.
Contract Dates of Importance
Congratulations! Your offer has been accepted, and the clock starts ticking! We will send you a Contract Dates of Importance form as well as several other important documents of all the pertinent information and dates in which we need to get certain items accomplished.
The form is laid out referencing lines on the Executed Contract to help you keep track of what the obligations are, when they are due, and where they can be found.
These dates are contractual, so missing something could mean the loss of the home and/ or the earnest money deposit, so we will be in very close contact with you to ensure we stay ahead of the curve.
One of the most important dates on this form is the last date the buyer can cancel the contract, or the end of the contingency period. This is typically 15 days after the date of the contract, and there is much to do in this time.
As mandated by law, the Seller's Property Disclosure document must contain anything known by the seller or their real estate agent that could negatively affect the value of the home. At this point of the process, if we have not already seen and reviewed this document, it will be on it's way. It is a great tool that may help us find out more about the home even before the inspections.
While there are dozens of disclosures that can apply to specific situations, the 3 other most common disclosures are:
- Homeowners Association (HOA) Disclosure
- Lead Based Paint (LBP) Disclosure
- Radon Disclosure
Final Loan Decisions
At this point you should have chosen a lender, completed your loan application, and have given instructions to order your appraisal and credit report.
Once your loan application is approved, you will enter the underwriting process with the lender. Underwriting is a loan process step in which the conditions and terms of the loan are determined. You may be asked for additional documentation or verifications of previously supplied information.
Just as with the Contract Dates of Importance, time and transparency is of the essence here.
Real estate appraising is an art, not a science.
The appraisal is ordered at this point by the lender for an objective way to ensure the offer price is appropriate.
An appraisal is an unbiased estimate of the fair market value of the home. It is a process that takes into account the home's condition and the values of similar homes in the area.
The success of the transaction depends on the appraisal confirming the value of the home is equal to, or greater than, the purchase price. Otherwise, further negotiations will be needed.
A crucial piece of the process, the inspections, will give us an idea of the home's overall condition, so that you can make an informed decision.
There are several types of home inspections you may want to consider, but the most common are a general home inspection, a Wood Destroying Organisms inspection, and a radon test. These inspections are typically ordered by and paid for by the buyer. We have an extensive list of local service providers to offer you, so this process will be less overwhelming. We can even help you coordinate the inspections.
A general home inspection is an objective visual examination of the physical structure of the home from the roof down to the foundation.
A Wood Destroying Organisms inspection is an examination of the home for visible evidence of an infestation or damage by termites, beetles, or fungi.
Radon is a naturally occurring gas emitted from uranium in the soil which can enter a home through the foundation. The Environmental Protection Agency has recommendations on mitigating high levels of radon inside homes.
During this inspection period, the clock is still ticking, so we want to work closely together and communicate often to ensure everyone involved is up-to-date. Once inspection reports are in hand, we can plan to meet to discuss the findings and begin negotiations, if necessary.
Title insurance and homeowners insurance are both extremely important, and required by lenders.
Title insurance may protect you from certain losses in the event an issue arises with the title after closing. Typically, title insurance will be required for both the lender and the buyer.
Homeowners insurance policies typically cover damages caused by fires, lightening, windstorms, and hail. It is important to understand what is covered in the quote, and look for additional insurance for damage caused by certain natural disasters, as well as flooding.
Upon receipt of the initial offer, the seller may accept, counteroffer, or reject the presented contract. This isn't always about a higher offer price, but may be for terms like a faster closing. It is all dependent on the motivation of the seller, but we will be there every step of the way to make sure you are informed and that we are appropriately responsive to the contractual deadlines.
The best offer will have the most preferable price, terms, and closing timeline, but there are ways to give yourself the advantage. Things that tend to be prudent in strengthening your offer are:
- Working with recommended, local lenders
- Increasing your earnest money deposit
- Shortening contingency periods
- Being flexible with the closing date
- Avoiding a bidding war, as there may be multiple offers from other buyers
Dealing with a rejected offer can be frustrating, but it is a great way to learn if our strategy needs to be re-examined.
Final Walk Through
The final walk-through of the home should be no earlier than the day before closing. We will ensure the house is in the same condition it was in when we placed the offer, that all negotiated repairs were completed, and that all items included in the Purchase and Sales Agreement are in the home. You will be provided with our FInal Walk Through Checklist to assist with this part of the process.
You will also be provided with closing reminders: location, time and place - as well as a handy-dandy Moving Checklist to assist you with your transition.
It has been a long journey, and it is time to celebrate!
Here we will compare the Cost Estimates from the lender to the Loan Disclosure to ensure accuracy and understanding. These documents will provide a summary of the expenses paid by you.
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