A GUIDE TO BUYING A HOME
Learn more about buying a home.
HOME BUYING GUIDE
This guide has been prepared to help you navigate through the process. There are many steps in buying a home and the information can be overwhelming. We have outlined some preliminary steps to take to be successful at your home buying.
Interview a real estate agent
Hiring the right agent to represent you and your interest is important. There are many licensee’s out there, however only a few that are full time and have experience. With so many different components that need to come together to successfully close escrow, hiring the wrong agent can mean the difference between getting your offer accepted and also closing on time.
Here are some questions to ask the agent you are interviewing.
Are you a full-time realtor?
How many transactions have you closed each year?
Can you provide a list of the homes you sold and references?
How many buyers are you currently working with?
Are you available evening and weekends?
Do you have a team you work with?
Another consideration should be is, do they have a serving attitude that makes you feel like you are the only client?
In many cases, there is no fee in hiring a buyer’s agent. You get the benefits of your own representation without any cost to you. Having an experienced buyer’s agents will work for you by using their negotiation skills to get you the best price, terms and in many cases getting your offer accepted when competing with multiple offers.
Checking your credit and getting qualified.
Even if you are not ready to buy for the next 3-6 months or even a year it is good to know where you stand financially and understand what you will need to qualify for the home buying process. An experienced agent will immediately refer you to a lender to get pre-qualified. The lender will check your credit and determine based on your income and assets what your home price range will be.
After your initial meeting with your lender you will understand how much money you need to get started. Down payments vary and, in some instances, you only need as little at 3.5% down. There are many factors to consider when applying for a home loan and your lender can guide you with the proper steps you should be taking to achieving the goal of homeownership.
In addition to your down payment there is a closing cost. You are probably asking what closing costs are and shouldn’t the seller be paying these costs for you. The answer is no, however depending on the offer you could negotiate your closing cost to be paid by the seller. The closing costs are an expense you pay those fees including but are not limited to, title, escrow, lender fees, home insurance, prepaid interest, prorated taxes and other miscellaneous fees. Ask your lender to give you an estimated closing disclosure for a breakdown of these closing cost. Keep in mind these are approximate and can vary from lender to lender.
Find the right home
Here is where an experienced agent comes in to play. The realtor will ask you a set of questions to get an idea of what you are looking for, the amount you have been pre-approved for and how soon you need to buy. Giving your agent a list of neighborhoods, must haves such as bedrooms, bathrooms and perhaps even schools will help them begin the search using various tools. Not all homes are on the internet or real estate directories. Experienced agents are networking with agents to get first-hand knowledge of homes that are coming soon.
Making an offer
If you are prepared to make an offer you will need to also be prepared to give an earnest money deposit. An Earnest money deposit is also known as good faith money. This is given as consideration of acceptance of your offer. The money is given to escrow via wire or cashier check 3 days after acceptance. The deposit is held in escrow and credited towards your down payment and closing cost at the close of escrow.
Along with your offer you will need to provide a preapproval letter from your lender and proof of funds of your down payment and closing cost.
When making your offer here are some things you should consider
The amount of your offer
Earnest money deposit amount
How long of an escrow period?
Do you need to sell your current home as a contingency?
Are you competing with other offers?
The purchase agreement prepared by your realtor will have contingency periods and a timeline that you should be aware of and follow.
What are contingencies?
The purchase contract contains contingencies you should be aware of. The typical contingencies are, appraisal, loan, inspections, investigations and review of disclosures. Discuss this timeline with your agent. If you fail to meet these deadlines you could jeopardize losing your deposit or the seller canceling escrow.
Your lender will need a copy of the fully executed contract upon acceptance. He or she will order the appraisal and contact escrow for your fee’s in order to prepare the estimated closing disclosure. Your lender will play a key role in successfully closing escrow. Hiring an experienced lender that works evenings and weekends will give you the peace of mind during the escrow period.
This is an out of pocket buyer expense ordered and required by your lender. The appraiser will go out to the home, take measurements and write a report to determine if the value of the home is the amount of your purchase price.
This is an expense that is paid by the buyer. Your real estate agent will provide you a list of home inspectors. It is important these home inspectors are qualified, certified and insured. The home inspector will go through the home and write a report for you to review. The home inspector will evaluate the general components of the home and make recommendations if additional professionals specializing in certain areas of the home such as pool, roof, plumbing, electrical or foundation.
Insurance also is part of your inspection period. Some homes are located in the high fire area, or flood zones that can be costly. Knowing your premium as soon as your offer is accepted will avoid surprises.
Sellers are required to provide a Transfer Disclosure and Seller Property Questionnaire as well as other disclosures. Read through these disclosures and ask questions. Make sure all your questions are in writing and that the seller also responds in writing.
Homeowners Association Documents
If the property is located in a homeowner’s association you will be asking the seller to provide the HOA documents, rules, regulations, and financials. You will want to know if there are any special assessments or increases in monthly dues.
Preliminary Title Report
Escrow Instructions & Reports
Terms to be familiar with
Real estate directories- Sites used to search for homes such as Zillow, trulia, realtor.com and redfin. It is important to note that these directories are not always accurate, and information may not be in real time. Also, some of these sites sell your information to third parties, in which you will receive numerous emails and phone calls.
Multiple Listing Service- This is the site that all brokers are required to use to register any new listing. If you see a sign on a property, it is most likely the property will be in the MLS under a few categories, coming Soon, active or pending. When you work with an agent you’ll have access to this information.
Status in the MLS or real estate directories
Coming Soon: A property that is not on the market, however it will be in the near future.
Active: A property that is available on the open market to buy.
Pending: A property that a seller has accepted an offer and is no longer available.
Sold: A property that has successfully closed escrow.
A third party that neither represents buyer nor seller. When you write an offer on a home you will write an earnest money check that will be place in “escrow.” That means it is not going directly to the seller. Escrow is responsible for holding money, paperwork or other assets for a transaction on behalf of buyer and seller before the transaction has been finalized. Buyer and Seller will each have their own fee.
The company that researches public records to determine the properties ownership status, liens, easement and any issues that may affect the ownership of a property.
Close of escrow
This is when your lender gives you final approval of your loan. Your lender will send you a closing disclosure to review the final numbers upon your approval loan documents will be ordered and sent to escrow. Escrow will contact you to set up an appointment with a notary to sign your final loan documents and give you instructions of money to wire to escrow.
(Caution: Beware of wire fraud. Make sure to have verified information with the escrow company and received instructions on a secure site).
Next step, your lender and escrow will communicate and prepare for funding your loan. Once
Escrow receives your funds and they will release the deeds to be recorded. You are one step closer to owning a home.
One of our favorite words. This means the home has officially recorded in your name with the County Recorder’s office. Congratulations! You are now a homeowner.