Buying a Home

Get Qualified for a Loan

The first step in buying a home is to determine how much house you can afford.  If you are planning to borrow money for the purchase of a new home, go to a bank or mortgage company and talk to a loan officer (who is also called a loan originator) about getting pre-qualified for a loan.  He or she will be able to tell you how much the bank is willing to loan you by looking at things like your current income, debts, and credit score.   Your Realtor can recommend loan officers to you if you need help.  After you go through this process, then you will know what price range to consider when looking for your new home.

House Criteria

Tell your Realtor what you would like in a home so that he or she can search for listings in your price range and set up appointments for you to start looking at various houses.   For example, how many bedrooms do you need, how many levels, what neighborhoods do you like, which schools are important to you, etc.   Your Realtor accompanies you to all property showings until you have found the property right for you.

Writing the Offer

After you select the house you want to buy, it is time to write an offer and submit it to the listing agent of that particular house.  Your Realtor will explain to you the various documents that make up the offer.  With your offer, you will also need to write an earnest money deposit check to the sellers.  This money goes into escrow if your offer is accepted.  It can be any amount, but traditionally is about 3% of the sales price of the home.  The amount shows the sellers that you are serious about buying their home.  It is held in escrow until the day of settlement when it is credited back to you by being deducted from the amount you owe at closing.

After the offer is presented to the sellers, the sellers can do 3 things:  They can reject it; They can accept it as written; or, They can counter your offer.  That means they can change the price and terms and send it back to you.  You can then make changes to their counter and send it back to them as your counter offer.   This is called the negotiation period and could go on for several counters.  After all parties have agreed on everything and have singed all documents, then the offer becomes a ratified contract.  At that point, your earnest money will be deposited with the listing agent.  Your Realtor presents each counter to the sellers for you.

Preparing your File

Your Realtor will send a copy of the contract to your mortgage company and to the attorney who will be handling the closing.  They will each open a file in your name and begin the process of gathering all information needed to close on the property.  The lender will gather all final financial documents needed from you, plus the appraisal report of the property, and possibly other reports pertaining to the property, such as a termite report.  At the same time, the settlement attorney will do a title search on the property to make sure that all previous sales of the property where recorded properly by the local county.  The attorney will also check to see if there are any liens placed on the property that the seller failed to disclosure.

Inspections and Appraisal

Per the agreed terms of the contract, a Home Inspection and a Termite Inspection of the property is ordered once the contract is ratified.  The buyer pays for both inspections.  After the Home Inspection, the inspector will furnish you with a summary report.  Along with the report, you will indicate which items from the report you would like the sellers to address.  The sellers may agree to all of the items on the list or just some.  Once both parties have agreed to the items that will be repaired, the seller starts to make those repairs so they will be completed by closing.

The termite inspection is conducted by a licensed termite company.   If the termite inspection indicates that the house shows no evidence of termites, the termite inspector will write a Clearance Letter.  If the report does show evidence of termites, it is the sellers’ responsibility to have the house treated at their cost and to repair any damage caused by termites.  The sellers will need to provide you with a copy of the receipt from the pest control company showing that the house was treated.

As for the appraisal, your mortgage company will order an appraisal of the property from an appraisal company.  The buyer pays for the appraisal.  Your lender will not lend you any more money than the appraised value of the home.  If the appraised value of the home is less than the sales price stated in the contract, then the two parties may have to renegotiate the sales price to the appraised price in order to allow your financing to be approved by your mortgage lender.

Preparing for Closing

Your Realtor will be in contact with your loan officer and the closing attorney during the transaction process.   The closing date is set in the terms of the contract.  Occasionally, the closing may be delayed due to unforeseen problems.  For example, your lending company may not have your loan finalized in time for the closing date.   It is very important that you work with you lender in getting all of your financial papers to him/her as requested.

Usually 1 to 2 days before closing, you and your Realtor will make a final walk through of the house to make certain that it is in the same condition as it was on the day you wrote the offer and to make sure all repairs requested of the seller have been made to your satisfaction.

A few days before closing, you will need to call the utility companies that provide service to your new home and have them put the utilities in your name as of the closing date.  Sometimes that will require a deposit from you.

Closing

On the day of closing, you and your Realtor will meet at the closing attorney’s office.  It is not uncommon for both buyer and seller to use the same closing attorney, but you will close at different times, not together.  You loan officer will work with you on the amount you need to bring to closing.  This amount must be in certified funds.  The loan officer sends a check for the amount they are loaning you to the closing attorney.  The closing attorney gathers all monies and disburses all monies.   There will be a lot of papers for you to sign.  Closing will usually take about an hour.

After the Closing

If the ratified contract says that your possession date is the same as your closing date, you will be given the keys to the house as soon as the settlement attorney disburses all funds from the transaction.  If your possession date is after the closing date, you will be given keys on that date.

Final Thoughts

Keep in mind that all real estate transactions include different details to the process. These guidelines explain the basic process and should give you an idea of what to expect when buying a home.  Your realtor will be helping you each step of the way.  Also, if you have any questions about buying a home, always feel from to call us at Banyan Tree Realtors.  We are happy to help you understand the buying process and answer any questions you might have.