About Buying A Home
10 Steps To Buying A Home
Step 1 – What Are Your Goals for the Purchase of Your Home?
- What do I want out of my home purchase?
- What features and characteristics are most important in the home I desire?
- How many bedrooms and bathrooms do I feel are needed?
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Answering these questions and any others that you feel are important will help you to clarify decisions associated with your planned purchase of a home.
The understanding provided by your answers will also help you guide your agent in understanding your needs and desires.
With a clear picture of your home buying profile, you and your agent can work together to find the home you desire and can afford.
Step 2 – Obtaining Financing To Enable Your Purchase
- In today’s market, when a buyer makes an offer he/she must demonstrate the ability to obtain any financing needed to close a sale.
- Even if the offer is all cash, the buyer needs to disclose where those funds will come from and give details about the liquidity of those funds.
- A buyer’s ability to successfully obtain financing can be shown by means of three distinct types of letters obtained from a lender.
- A pre-qualification letter is the most basic letter that a mortgage lender can provide. It is also the least valuable in the eyes of a seller because it is says the buyer is qualified to obtain a mortgage, not that the buyer is approved for any particular mortgage amount. Therefore a pre-qualification letter rarely accompanies an offer.To obtain a pre-qualification letter a potential borrower will provide a lender with income, asset and credit information. The lender will then write a letter stating what the information provided indicates the potential borrower can afford.No actual documentation of the information provided by the potential borrower has been examined and verified by the lender’s underwriting staff. The result is not an actual loan commitment on the part of the lender
- A pre-approval letter results from a potential borrower actually applying for a loan. All the supporting documentation of income, assets and liabilities have been received and reviewed by the lender. A credit check has been completed and deemed satisfactory. The loan application has been reviewed and meets lender underwriting and investor guidelines. The lender provides a pre-approval letter which states that a loan will be approved for a specific amount subject to certain conditions such as contract ratification and adequate property appraisal value. A pre-approval letter is most desirable when presenting a contract to a seller.
- A full commitment letter is traditionally provided after all conditions of the loan have been met. The contract has been received by the lender and the appraisal is complete. A full commitment letter generally happens a few weeks after contract ratification and alerts all parties that the buyer is ready to proceed to settlement from the standpoint of the required financing.Your agent can guide you through the financing process. She can provide you with access to reputable lenders and answer your financing questions.
- A good agent will work with you and your lender to ensure that you get the best financing terms that are available to you based on your credit profile and current market interest rates.
- Remember – your agent is there to help.
For more information on buying a home in the Montgomery County and DC area contact Lauren Kline, Long and Foster Real Estate, Inc., Realtor® at (301)518-9005.
Step 3 – Finding The Right Neighborhood For You
After completing Steps 1 and 2, you have a good idea of what kind of house you want and can afford. You can now zero in on the neighborhood you would like to live in.
- By making a list of the most important characteristics of any neighborhood you would choose to live in, you can make it easy to know if a particular neighborhood is for you. Characteristics to consider include:
- Proximity to your work
- Local transportation options such as a Metro stop
- Quality and proximity of local schools
- Neighborhood amenities such as parks, pools, theaters, restaurants
- Immediate availability of health care facilities
- General safety concerns
- Your completed list will allow your agent to help you pinpoint the exact neighborhoods that meet your desired profile and guide you straight to areas and homes that you are most likely to want to live.
Step 4 – Finding The Right Home For You
Buying a home is a big decision which has far reaching consequences.
There are financial consequences, environmental consequences and emotional consequences. Keep these points in mind when looking for the right home:
- Your agent can help you find the best home for you based on your needs, preferences and desires.
- A great agent is constantly in touch with the homes which are available and which will be coming available shortly by researching and previewing properties.
- She knows what you are looking for and will let you know immediately of a great home which meets your “must haves” perfectly.
- You can also go to open houses or have your agent get you inside any properties you know are for sale that you would like to see.
- Always give your agent detailed feedback about your feelings and impressions of the houses that you tour.
- Your feedback will help your agent zero in even more on exactly what you are looking for.
- Her goal is helping you to find the perfect house for you.
Step 5 – How Much Should I Offer?
You will seldom make an offer for the listing price of the property, unless you can determine with your agent’s help that it is exceptionally fair or even under priced relative to similar properties available at the time of your offer.
- The market value of a particular property is affected by a number of factors, here are a few of the main ones:
- Size of the property
- Construction quality
- Physical condition
- Amenities, such as garages, unusual landscaping, patios, pools, etc.
- Of course current market conditions and the availability of many other properties in the price range, some of which may be even more desirable will affect the price that a seller asks and the price and terms that you as a buyer can get.
- Analyzing these and other factors such as the motivation of the seller and the length of time their home has been on the market are all considerations which your agent will take into account when helping you to arrive at your offer’s price and terms.
- Once your agent has written the offer contract you want to have presented and you have signed it, your agent will register the offer with the listing agent and ask to present it.
- The presentation of the offer is generally done in person with all parties represented, your agent, you, the sellers and the seller’s agent.
- This is where your agent can provide tremendous value by helping to negotiate a very favorable price with terms and conditions that further enhance the cost of purchase and convenience of transfer of the property to your ownership.
Step 6 – Negotiating The Purchase Price
- Prior to contract ratification (mutual written acceptance of the terms and conditions of the sale contract), almost everything is negotiable.
- Your goal should be to get the most favorable price and terms that can be agreed to by you and the seller.
- Current market prices and the level of interest from competing buyers will affect a seller’s willingness to agree to your offered price and various other terms you specify when you make your offer to purchase a particular home.
- Your agent will help you “take the seller’s temperature” and determine how and when to make the offer that will get you the price and terms that you truly want.
- Elements that you might find yourself negotiating include:
- The type of financing utilized to complete the sale
- Closing costs and their allocation
- Repairs to the home as conditions of sale
- Inclusion of appliances and fixtures as part of the sale price
- Landscaping additions, improvements and allowances included in the sale price
- Painting included in the sale price
- The occupancy date for the home’s availability to you
- Your agent can potentially save you significant time and money by guiding you in the structuring of your offer and any counter offers needed to reach an agreement for sale.
- Knowing how to balance pricing considerations with other contract terms can make a huge difference in the net cost of your home purchase.
- Following successful negotiations and with the agreement of all parties, the contract will be ratified.
- At this point no changes can be made to the contract without the written consent from both you and the seller.
Step 7- Contingencies And The Escrow Period
- Your newly ratified contract is placed into an escrow account which has been established for the processing of your sale contract with the seller.
- An escrow company is a neutral third party entity that is entrusted with processing the executing of the terms and conditions of your ratified contract with the seller.
- Your agent will work on your behalf to help satisfy any contingencies contained in the sale contract. Your agent will also monitor the processing of your escrow to make sure that all the elements necessary for a successful close are both available and completed as required, examples of contingencies include:
- Satisfactory results of physical inspections
- Financing requirements
- Availability and presence of appropriate insurance
- Examples of elements required for closing include:
- Financing documents
- Property Insurance documents
- Title Insurance documents
- Your agent is your advocate for successfully addressing any issues which arise during the escrow period which could affect the outcome of your purchase.
Step 8 – Preparing For The Close Of Your New Home
- A few days before the scheduled closing of your new home you should contact the settlement attorney/agent handling your purchase to ensure that all required documents are present in your transaction file and that they are in order and properly executed.
- You will also need to verify the exact amount of the funds needed to successfully close the purchase of your new home.
- Making sure the needed funds are available and present in your escrow account is the last needed step prior to the actual settlement of your home purchase.
Step 9 – Settlement Of Your New Home’s Purchase
- A successful settlement results in the transfer of legal ownership from the prior owner to you.
- You receive the deed to your new home and the seller receives the net proceeds resulting from the purchase.
- Your agent will attend your settlement to represent your best interests and to verify that everything required for a successful settlement goes smoothly and exactly as planned.
Step 10 – Your New Neighborhood And Home
Congratulations!You are now the proud owner of your new home. You are free to take possession and move your furniture and belongings in your home.
- Establishing your new residence as the desirable oasis you envision can be challenging. Your agent can provide you with access to people and information that can make a smooth transition into your new neighborhood and home.
- Knowledge of neighborhood amenities and availability of trustworthy service people, merchants and contractors are just a few resources you may want to tap into with the help of your agent.
- Please do not hesitate to ask for help in learning about any aspect of your new neighborhood or home.
- I am here to help.