Home Buying Process, Step By Step

Home Buying Process, Step By Step

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DETERMINE WHAT YOU NEED: It is important that the very first step in the home buying process is making a determination what kind of house you really need. There are questions like do you prefer a detached home with a yard... or a townhome where you may share a wall with the neighbor... or a condo which will require significantly less maintenance? Will you require 3 or 4 bedrooms? The number of full or half bathrooms that is absolutely necessary? Identifying the difference between a want and a need? For Example: Full bathrooms in the master bedroom is always nice... but is it really a necessity when it will be just you and one young child living in the house.

KNOW WHAT YOU CAN AFFORD: The unfortunate reality is that there are very few of us that will be able to pay full cash money for a home. Therefore we are going to have to get financing from a bank, mortgage company, credit union, etc. It just makes good business sense to speak with them now. You want to learn exactly what loan programs you may be eligible for. You need to know your maximum price range, if there is any down payment amount required, if you need to clear some things on your credit report, etc. This is called pre-qualification. It is absolutely free and will let you know all your options.

START YOUR HOME SEARCH: After you've been pre-qualified, and know price ranges of homes. You know if you can make any required down payment. Plus you know if there's credit issue that you will take care of, etc. So now it is time to actually start looking for a home to purchase. In recent years, this usually means starting with an internet search to learn about their local real estate market and what is available. Newspaper ads and Homes magazines are still useful. Then there is always just simply driving through the neighborhoods you already know you like. You can also go to open houses, etc.

MAKE AN OFFER: Once you've looked at homes and found one that fits what you are looking for... nice area.... it's affordable in your range... and you really love it. The next step is to put in an offer of purchase to the seller. Written offers to purchase will include the price you are willing to pay, any terms and conditions, and any things that needs to be accomplished by either party before closing. (like the buyer getting loan approval... the seller performing any repairs, etc) Once the seller accepts and signs your Offer, it then becomes a binding Contract between you and the seller. As with any contract there are penalties and legal, plus financial, repercussions if it is breached or violated. Because of this, it is always strongly recommended you seek professional assistance when drafting and making the Offer of Purchase.

NEGOTIATIONS: As just explained... If the seller accepts and signs your Offer of Purchase exactly as you wrote it then it becomes a legally binding contract. However, the reality of what often happens is that your offer is not exactly what the seller wants. Therefore, in the overwhelming majority of cases, what usually follow after the Offer of Purchase are negotiations between you and the seller of the home. Negotiations are the process of attempting to reach terms that both the buyer and seller can agree on. You may have to negotiate price, financing terms, repairs, closing and move-in dates, and other things that each party may find important to them. What usually happens is that when you submit your written Offer of Purchase... the seller changes something and sends it back to you. This is called a counter offer. Then you can either accept it... reject it and continue looking at other houses. Or make another counter offer by also changing something and sending it back to the seller. Now you have another counter offer. In theory this can go back and forth indefinitely. But, it is important to know that while you and the seller are going back & forth the home is still up for sale and wide open for anyone else to submit an offer that the seller could accept. However, if you really want to buy the home... and the seller really wants to sell the home... then you will quickly reach acceptable terms both can agreed on. Once everything is initialed, and signed by both parties, you will have an official Contract for Sale. The house will then be removed from the market as a sale pending.

MAKING SURE THE HOUSE IS ACCEPTABLE: Up to this point you have only walked through the home... and liked it enough to make an offer to buy it. Now that you and the seller have agreed to terms... the negotiations part has passed... and you have a signed contract. Now it is time to make sure the building itself does not have any major problems. The contract specifically calls for this. It would not have been practical to do anything before you and the seller have the agreement. Now the structure itself will be looked at:

Home Appraisal - The objective of the appraisal is determining the value of the home. The bank or mortgage company is going give the buyer a loan for a specific amount. They require the buyer to establish to them that the home is worth that specific amount. Therefore a home appraisal is always a part of the loan process. It is commonly done by a state licensed appraiser. He compares the home with houses that have similar features (square feet, number of bedrooms, bathrooms, etc) which have recently sold in the neighborhood, or same general area.

Home Inspection - Appraisals are mainly looking for home value. The appraiser will note the obvious things like a broken window, missing roof shingles, etc. but they do not crawl underneath the home, or go on top of the roof, etc. The only way to get those checked out is by getting a home inspection. The home inspector is not at all concern with value. They are inspecting the overall condition of the building, and its major components, to determine if anything is in need of immediate repair. Home Inspections are not usually a loan requirement, but it is very good ideal for the buyer to have done. It would be terrible to buy and home, move in the home, and then immediately have to spend lots of money repairs.

You also have options to get the roof certified by a state licensed roofer. Also getting a state licensed HVAC tech certified the heating & cooling system... lead base paint inspections for homes built before 1978. Septic tank inspection.... radon gas detection... termite inspections... whatever you feel may be questionable about the house, or is a very important concern to you.

FINALIZING THE LOAN: Loan companies can require a lot of different things. If had gotten a pre-qualification then you would upfront what was needed. This eliminates last minute surprises. And it significantly reduces the stress out of buying a home. Lenders have these requirements to make sure they are not making a loan on a home that... the buyer can not truly afford... it's not worth the money.... the building is not in good condition.... or they can not resell later, if necessary.

That is why proof of income... proof of employment.... appraisals on the home... certain inspections, etc. are requested by the banks during the loan process. In addition, banks want to protect the investment made by both parties, so they will ask for home insurance to be secured and the title from the seller to be clear before giving final loan approval.

CLOSING: Finally! One of the last, but most important, steps to buying a home is here. It is the day that everyone has been waiting for. Both sides will meet at a real estate settlement company or attorney's office. The home closing is a combination of the buyer accepting & signing the loan financing documentation, and the seller signing documents that transfer deed, title and ownership of the home. The individual conducting the closing will be able to guide you through the paperwork and explain all the documents to you. Then there is a final closing statement which the government requires everyone to use. It's called the HUD-1 statement. It's is like a big receipt that has a line by line itemization of every cost involved with the home purchase. It will show the total amount paid, and/or owed by both buyer and seller. You will be presented with the keys at the end of closing

MOVING IN: The home purchase process technically ended with the closing. However, for most buyers it is actually moving in the home which can be the most emotional part. The process of moving in your furniture and spending your first day, or night in the home when it truly sinks in that you have just completed a major accomplishment in life.

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