The first time around, home buying can be intimidating, but the steps are relatively simple, and we are here to guide you through each transition. Here’s a quick step-by-step overview of the process.
1—LOAN PREAPPROVAL. The first step is to find a lender and get preapproved for a loan. This way you will know how much you can borrow and will be ready to make an offer when you see the home you love. We recommend you shop for the best rates and terms and ask lenders to give you an estimate of your potential costs for a property in your price range. This will let you know how much you will need to bring to the table and give you a ballpark estimate of your monthly mortgage payment. Don’t be shy. Ask the lender lots of questions!
2—FIND A HOME. After we discuss your wants and needs, we can view homes, target an area, find a home, and prepare an offer. We will set up an automatic search from our local Multiple Listing Service (MLS) feed that will e-mail you information on homes that meet your criteria as soon as they are available. Seeing homes as soon as possible increases your opportunity to make offers before other buyers do.
3—MAKE AN OFFER. We will use the residential sales contract developed by the local association of REALTORS®. As your buyer agents, we will present the contract to the listing agent on your behalf and also submit all counteroffers. Your offer must include a pre-approval letter from your lender and a copy of the earnest money check, which is usually about 1 percent of the sales price. It is cashed only when your contract is accepted (ratified).
4—OFFER ACCEPTED! When a seller accepts your offer, our broker will cash your earnest money deposit check and hold the money in an escrow account for you. If the deal falls through because of buyer contingencies or by mutual consent of all parties, you will get your money back. If you proceed to closing, the funds will apply to your purchase.
5—LOAN APPLICATION. Once you have a ratified contract, you must contact your lender and begin the loan application process—which of course, must be completed in time for settlement. At this point, you may want to lock in your interest rate. Your lender will keep in touch and may ask for additional information along the way. Make sure you respond promptly to ensure paperwork is complete in time for closing day.
6—HOMEOWNERS INSURANCE. Make sure to get several homeowner insurance estimates from different companies. Your lender will ask you for this information. If you buy a condo, the association will have a master insurance policy for the property. However, you will need a policy to cover the inside portion of the unit (a “walls-in” policy) and all of your personal belongings. In fact, your lender will likely require it. Such policies are less expensive than full-fledged homeowner policies, but they are no less important. You should have this policy in place at closing.
7—TITLE INSURANCE. The buyer selects a settlement/title company. This is the firm that will provide title insurance (see “Title Insurance: What it is and Why You Need It” on page 30) and will arrange the closing. The settlement agent will work in tandem with your lender to help get the loan processed and the deal closed.
8—CONDO/ASSOCIATION DOCUMENTS. For condos, townhomes, and homes in home owner associations, sellers must provide association documents to buyers, known as the “resale package,” before settlement. Buyers then have a few days from the day after receipt to review them (see chart on page 27). The buyer may, within that timeframe, void the contract. If buyers do not act within the timeframe, they lose their option to cancel the contract under this contingency.
9—HOME INSPECTION. Most buyers make their offers contingent on a formal property inspection within a period of time specified in the contract. We will help schedule the inspection and attend it with you. If there are problems, we can contact the seller to see if they will cover some or all of the costs. If you don’t want to buy the home after the inspection, we will send the report to the seller and tell them you want to withdraw. This must be done within the time established in the contract, usually within seven days or less, or you will lose the option to exercise this contingency.
10—WOOD-DESTROYING INSECT INSPECTION. The home must undergo a wood-destroying insect inspection within 30 days of settlement. Buyer or seller may pay for inspection. Extermination and necessary repairs as a result of the inspection are the seller’s responsibility.
11—WALK THROUGH. Within a few days before closing, we will go with you to view the property to ensure it is in the condition agreed to—including repairs that the seller agreed to make after the inspection, if any.
12—SETTLEMENT. During the weeks after you have a ratified contract to purchase, the lender and the settlement/title company will work to get paperwork ready for closing. They may pester you for documents and information along the way. Prompt responses on your part will help us meet the closing date in time. At least three days before closing, your lender will provide you with a “Closing Disclosure” form—a closing document that itemizes all fees, payments, and costs related to the sale. We will go through it with you. It will indicate how much money you need to bring to closing. Then, the day before (or the morning of) closing, you will need to get a cashier’s check from your bank that covers closing costs, plus the down payment.
13—MOVE-IN! After signing at closing, you are done. Now you can start enjoying the benefits of home ownership!