The Buying Process

Pick A Good Team Of Advisors

Buying a home is not driven by selecting and then buying a product. Buying a home is a process. Most home buyers who report being pleased the most depended upon the advice and counsel of experts.

You will be well served to select a Home Loan Specialist (loan officer), Real Estate Advisor (Realtor), Attorney (Title Company), and Home Inspector. With a solid group of advisors in each of these areas, you will be able to handle just about any situation which might arise.

Determine YOUR Financial Capacity (Know Your Numbers)

There is no greater source of confusion than the costs associated with buying a home. There are so many numbers flying around once you've found your home that many tend to lose control over what the end result will be. You will hear all kinds of horror stories!

Determine How Much You Can Afford

A good place to begin is to examine your current budget. How much are you paying in rent? The current tax code encourages home ownership by allowing you to deduct mortgage interest payments from your taxable income. Even if your new mortgage payment is higher than your rent, the effective costs (after tax considerations) may result in a housing expense that is comparable or even lower than your current rent.

As you get into the home buying process, you'll hear much about what lenders will allow and will not allow in terms of how much loan you can obtain. In the mortgage business, there's a lot of emphasis on ratios of income to debt. Don't let ratios alone determine how much home you'll buy. You're the one who knows how much you can afford. Make a list of the reasons why you can afford the payment you've established.

Think through where you are in your career. What are the prospects for an increase in your income? How long will you have to wait for that increase? Are there compelling reasons for you to stretch your budget to purchase more home now?

An experienced home loan specialist can help you to understand the correlation between the cost of a home, the monthly payment, and your total cash needed to close. The home loan specialist can also listen to your specific financial situation and pre-qualify or, better yet, pre-approve your loan. There are a number of benefits to dealing with the financing before you locate your new home.

A well planned meeting with your home loan specialist will provide tangible results such as:

Peace of mind—Granted, peace of mind is an intangible benefit, but there is a strong value in knowing that you can obtain the financing you'll need to move forward in the purchase of your home.

Statistics indicate that you will recognize a significant advantage and savings when it is time to go into serious negotiations for the purchase of your new home. Our market is very competitive. It is not uncommon for a well priced home to receive multiple offers. There's nothing more frustrating than locating a new home after looking for the past two months only to find that somebody else beat you to the punch because another buyer could make an offer without any financing contingency.

Your home loan specialist might even offer some good suggestions which will prove valuable in setting up the best financial deal possible.

Get In The Zone
(Find Where You Want To Live)

You're the only one who can really judge the right place for YOU to live. Most folks looking to buy a new home tend to select their home by first selecting the community, then the neighborhood, then the outside of the house, and finally look at the inside of the home. The point is that selecting where you want to buy is a major consideration.

Take the time to carefully evaluate and consider all of the factors which make a community or neighborhood desirable. Look into the schools servicing the neighborhood. Even if you don't have children, the public's perception of the quality of the school may impact the value of homes in the neighborhood now and in the future. Does the neighborhood have common facilities like a club house, pool, tennis courts, etc.? Are there costs to join or maintain? You get the point. . .make sure that you thoroughly investigate the area and the neighborhood.

Know The Docs

As noted previously, buying a home is a process driven endeavor. You will soon learn that one of the factors driving that process is documentation. It would be interesting to know how many times you will sign your name from start to closing when you are buying a home!

I find that there's nothing more frightening than just having someone put a contract in front of me and ask that I sign on the line!

Before you find that perfect house and are in the position where you need to make an offer, get copies of common real estate forms so that you will at least be familiar with the documents that you will be using in purchasing your home.

Without any question, the most important standard form is the OFFER TO PURCHASE AND CONTRACT. It is a standard form which is available through your Realtor or your Attorney. (Remember the importance of picking a good team of advisors?)

Negotiations & Pricing

In deciding how much to offer, try to determine what is motivating the sellers to move. Do they already have a contract on another house? Are they building a new home? Have they been transferred to a new area? How much equity do they have in the house? How does the asking price of the house compare to the market value of other homes you have seen in the neighborhood? How long has the house been on the market?

There are many aspects to making an offer. . .price is only one element.

The OFFER TO PURCHASE AND CONTRACT that you are going to review and learn serves as an excellent outline for other critical questions which enter into the negotiations. When will you close? When will you move in? What are your rights to inspect the property? Will they leave the drapes and the refrigerator?

All of these key points should be addressed in your offer. Each is very important to assure that you have a smooth transaction.

Try not to view the negotiations as an adversarial confrontation. Keep in mind that you and the seller have a common goal.

Loan Approval

Getting your financing for your home can be best understood by knowing about what happens along the way. Most folks have a better understanding when they are aware that there are four basic components:

Loan Application—You will meet with your home loan specialist and make official application to purchase your home.

Processing—After the application, the information will be documented by independent sources, an appraisal is ordered and your credit report is obtained. This usually takes 2 to 3 weeks.

Underwriting—This is when your loan is approved. After the processing and document gathering is completed, an underwriter reviews the information and issues an approval.

Closing—This will be addressed more fully in Step 7, Legal Issues. Technological advances have made the mortgage process quicker so that it is now possible to be approved and closed in about 2 to 4 days. The timetable noted represents the norm.

But don't worry. . .you've already talked to a home loan specialist and you are already on your way

to approval!

Inspections

Remember the OFFER TO PURCHASE AND CONTRACT? When that document is properly completed, you have the right to have your target home inspected to evaluate it's structural integrity, heating, air conditioning, plumbing—the works!

Your home inspector will provide you with a written report describing many physical components of your home. More importantly, the inspector will make you aware of any repairs which may be necessary.

You may need other specialized inspectors for termites and potential wood destroying organisms, well and septic, and environmental inspectors (radon, oil tanks, etc.).

Legal Issues

Congratulations! Your Loan is approved, the house checked out just fine and now you are ready to close on your new home!

Your attorney serves two major roles in helping you:

Assures Marketable Title—The attorney will examine the chain of title to assure that there are no defects. In conjunction with examining the title, the attorney will also obtain title insurance and order the survey.

Preparation and Disbursement of Funds—At closing, your attorney will receive money from you, the lender, and the seller. The attorney will prepare an itemized statement (known as “HUD 1”) which details who spent what. The attorney will disburse the money as it's directed by writing checks from his/her trust account when they return to the courthouse and check the title one more time before disbursing funds.