The Home Buying Process

1. Choose a lender and get pre-qualified. You can’t buy a home without getting pre-approval from a lender unless you are paying cash.

2. Have your lender give you a commitment or pre-approval letter. This is a letter from the lender stating that you are pre-approved to buy a home. You will need this document when your Realtor submits an offer on a home. Take it with you when you go home shopping or email it to your Realtor.

3. Choose a Realtor. Communication is key here. Tell them what you expect in a home, what you desire in a home and what you have always dreamed of. You probably won’t get it all, but know what is most important and make sure your Realtor knows.

4. View homes online.  There are many internet sites such as Zillow and Trulia which you may visit to view homes.  HOWEVER, they are many times not accurate.  To get a live, up to the minute, accurate list of homes on the market ask your Realtor to set this up for you directly from the MLS.

5. View potential homes with your Realtor. You may find your dream home on the very first home you see or further down the line. When you find it, be prepared to make an offer right then. Many buyers are disappointed because they didn’t act quickly and lost the home to another buyer.

6. Bring your checkbook. You will need to submit an earnest money check with an offer. A common amount is $500, but a seller may wish to see a larger amount. This money shows that you are serious about buying this home. The seller knows that the larger the earnest money, the more difficult it would be for you to walk away from it if you just change your mind. It will be applied toward your down payment or closing costs.  It won’t be lost, but applied where needed. If you are getting a 100% loan and sellers are paying your closing costs, the money will be returned to you at closing. The earnest money check will be made out to the title company where you will be closing your purchase and will be deposited in their trust account until closing. Your Realtor will not give them the earnest money check until you and the seller have agreed and signed the offer.

7. Your Realtor will submit your offer complete with a copy of your earnest money check and a copy of your commitment letter. A deadline will be put on the contract for the sellers to respond by or the offer is no longer valid. A good Realtor will offer suggestions regarding accurate sales price and concessions to request for you to be paid by the Seller.  The ability to negotiate well is a requirement for a successful Realtor.

8. The sellers may agree to and sign your offer immediately or they may submit a one page counteroffer with a few changes they wish to make regarding the terms of the sale. You have the option of agreeing to that offer and signing, or submitting your own counteroffer. If you and the sellers cannot reach a common agreement, then the offers are void and you can start new on another home.

9. Once your offer is accepted by the seller and all parties have signed the contract, your Realtor will take the earnest money to the title company.

10. You should then call for your inspections. You may have as many types of inspections as you wish, but the main ones are the general home inspection and termite inspections. It is your choice who to call, but you may obtain a vender list from your Realtor and ask for their professional opinion on whom to call. It is your responsibility to pay for the inspections as you are hiring them to perform a service for you. Should the inspections reveal damage beyond what you feel is acceptable then you have the option to be released from the contract at that time. However, you are still responsible for paying for the inspections.

11. Your Realtor will then fill out a form commonly referred to as a TRR form. This stands for Treatments, Repairs and Replacements. They will work with you on filling out this form based on the repairs found during the inspection. When you submitted an offer you requested a specific ‘repair cap’ which is an amount the seller is to apply towards those repairs. Your Realtor will then submit that form to the listing Realtor for the seller to agree to and begin repairs. They may disagree and renegotiate or modify the TRR form.

12. Your Realtor will schedule the closing date which you agreed to when you submitted your offer. Choosing the title company is up to you. You may ask for a list of recommendations from your Realtor.

13. You need to make sure that you promptly get all documents to your lender should any be required, such as bank statements, paycheck stubs, income taxes, etc. This is a top priority and if not taken care of in a timely manner, it may delay closing.  It is important that your financial picture, i.e. cash on hand, debts and expenses remain stable through this process.  Any new debts or large expenditures can hinder your loan and even result in your loan denial.  Wait until after closing to buy furniture or other items you will need or want for the home.

14. You need to obtain an insurance agent for your home insurance. When your Realtor gave you a buyers net sheet which showed your estimated monthly payment it included an estimated insurance amount based on averages for your area. It was by no means an exact quote. All insurance companies are different and they all have different rates. It would be prudent to shop around and get a few quotes from different insurance companies. The lower your insurance, the lower your monthly payment will be. Work on this as soon as your offer is accepted by the seller. When you have selected your insurance agent and company give that information to your lender and the title company for processing.

15. Once you have completed the above steps you will be waiting for the seller to complete the repairs and for your lender to complete the lending process. Your loan will be in what is called ‘underwriting’. Each component of your financial status will be evaluated by a team of qualified financial experts to verify that you are able to repay the loan. They will also be determining that the money you are applying towards down payment and closing costs are from valid sources. If the money was given to you from a parent or friend, you will need what is called a ‘gift letter’ to verify where this money came from. Saving large amounts of cash in your mattress and then trying to use it for a down payment is not a good idea and you may be denied the loan because they will not be able to verify where the money came from. Work closely with your lender to overcome any obstacles that may occur in underwriting. Don’t get discouraged, obstacles are common and your lender will be experienced at overcoming them.

16. Also during this time, the lending company will send out an appraiser to determine the market value of the home. If he is an appraiser for FHA or VA they will also determine if the home meets FHA or VA requirements. There is a set of standards that they go by and to view them online you may go to this http://www.fhahandbook.com/docs/41502ch3.pdf website for FHA and to this http://www.benefits.va.gov/warms/pam26_7.asp website for VA. It is good to review these guidelines prior to shopping for a home. Many foreclosures and properties that are advertised ‘as is’ may not qualify for an FHA or VA loan.

17. Just prior to your closing date your Realtor and lender should receive a title commitment from the title company. This is a written statement by a title insurance company setting forth the conditions under which it will insure a particular parcel of property. The title commitment would usually be written and signed by a title insurance agent of the title insurance company.

18. Your Realtor and lender will also receive a HUD-1 statement. This is a form used by a settlement or closing agent itemizing all charges imposed on a borrower and seller in a real estate transaction. This form gives a picture of the closing transaction, and provides each party with a complete list of incoming and outgoing funds. "Buyers" are referred to as "borrowers" on this form even if no loan is involved. Here you will see all closing costs itemized and the amount, if any, which you will need to bring to closing in the form of a cashiers check.

19. The big day is the closing day! This is when both the sellers and the buyers will sign over title of the property. You will also sign your mortgage and your loan note on that day. The mortgage puts your home up as collateral for the loan and the note is the actual commitment to repay the loan. If you are married your spouse will need to attend and sign certain documents, even if they are not going to be on the note or the deed. You will receive the keys to your home at closing.  Even if you and your spouse are legally separated, but not divorced, they will still need to come to the closing and sign a document acknowledging that they realize you are buying or selling property.

20. Funding is when the mortgage company actually wires the money to the title company to pay for the home. This usually happens right before, during or just after the closing. If the closing is late in the day the wire transfer may not happen until the next morning. In some rare cases, funding hasn’t happened for a few days. When the title company receives the funds they will pay off the sellers remaining mortgage, the invoices for inspections which were not previously paid for and any repairs that were billed at closing, the Realtors commissions and the title work and fees for work done. Many contracts state that a buyer is to take possession ‘at funding’ which is not necessarily at closing.

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