10 Steps to Owning Your Own Home
STEP 1 - DEFINE
NEEDS FOR YOUR NEW HOME
Congratulations on your decision to purchase a new home! Your first
step toward buying your new home will be to analyze your needs. Your
real estate agent can help you determine exactly what you want your
new home to look like and how it should function for you and your family.
First, write down why you are looking for a new home. For example, are
you currently renting and would like to begin building equity? Maybe
you recently married and have outgrown your current residence. Or, maybe
you received promotion that requires you to move to a new city. These
factors will all have a bearing on how you approach your home search.
Second, establish a time frame for buying your home. Depending on your
reasons for wanting a new property and the current state of the market
in the area you are looking to buy, you should be able to come up with
a rough guideline.
Finally, you probably have a mental picture of what your dream house
looks like. Turn these ideas into two lists: one should describe your
dream home and the other should list features that are absolute must
haves. In a perfect world, your new home would fulfill both lists 100
percent, but it is more likely the two lists will turn into a list of
priorities, as you get clearer about what you want and what is available.
STEP 2 - PRE-APPROVAL
VS. PRE-QUALIFICATION
Now that you know what you want in a home, you need to find out what
you can afford. There are two ways to go about this: prequalification
or pre-approval for a loan. Either way, you can contact your agent about
choosing a mortgage company. Prequalification is the simpler of the
two processes. It can even be done online or over the phone. When you
contact a mortgage company, they will ask you for some basic information
about your finances ? how much money you earn, your debt load, etc.
They will take this information and give you a rough estimate of how
much of a loan you might qualify for.
Pre-approval is more a more in-depth process. The lender will perform
an extensive check of your finances including your credit rating, whether
or not you're a first-time buyer, what your debt load is, how much money
you have to put as a down payment, etc. This figure will be a much more
reliable estimate of what you can afford.
In most markets, pre-approved buyers are preferred over those that are
merely pre-qualified. Being pre-approved lets the seller know you have
gone through an extensive financial background check and there should
be no unexpected obstacles to you buying their home.
STEP 3 - NEIGHBORHOOD
INFORMATION
Now that you have your list of needs and wants and know how much you
can afford to spend, it's time to look at some houses, right?! Well,
don't forget, people don't just buy a house; they buy the neighborhood
the house is in. Think about that...if you found the perfect house but
it was in a neighborhood that was not to your liking, would you make
an offer on it?
You will need to make another list for the type of area you want to
invest in. Consider things like drive time to work and major destinations,
amenities such as swimming pools, tennis courts, parking, etc., area
schools and the demographics of the surrounding area.
STEP 4 - HOME SEARCH
At this point you will have a good idea of what you can afford and the
type of area you will want to invest in. Taking that information into
consideration, you are ready to embark on your home search. If you don't
know much about the city to which you are moving, you will want to start
by finding areas that meet your criteria and then narrowing your search
to particular properties in those areas.
There are a few ways to go about this. Possibly the most efficient way
to find homes is to allow your real estate agent to keep you up-to-date
on available properties that meet your criteria, and then allow your
agent to screen them for you. When your agent presents you with a home
that interests you, he or she can arrange for you to tour it at your
convenience.
You can find available homes by reading local real estate publications,
contacting local Neighborhood Associations, visiting the local Chamber
of Commerce, looking on the Internet, or driving through neighborhoods
that meet your needs. Driving around a particular area looking for a
home that is for sale is good because you can actually see the house,
but it can be very time consuming and very "hit or miss."
STEP 5 - MAKE AN
OFFER
Now that you've found your dream home, it's time to make an offer. Your
real estate agent will help you determine the offer price by reviewing
recent sales of homes that are similar in size, quality, and conveniences
and amenities. Your real estate agent will advise you on how to create
an offer that will have the best chance of being accepted.
After consultation with you, your agent will create a written contract
with your offer that meets all the local and national legal requirements.
This document details what needs to be done by both parties to execute
the transaction. It should protect the interests of both parties and
will ensure your financial position as the buyer.
The contract should include, but is not limited to, the following:
Legal description of the home
Offer price
Down payment
Financial arrangements
List of fees and who will pay them
Amount of the deposit
Inspection rights and possible repair allowances
Appliances and furnishings that will stay with the property
Settlement date
Contingencies
Remember the legalities of this phase are very important. If you have
any questions or concerns, be certain to address them with your real
estate agent right away.
STEP 6 - NEGOTIATING
TO BUY
Once your offer is made you may need to negotiate with the seller to
reach an agreement. Keep in mind almost everything is negotiable when
you are buying a house. This can give you a great deal of leverage in
the buying process, that is, if you have adequate information and you
use it in an appropriate manner.
Some things you may negotiate:
* Price
* Financing
* Closing costs
* Repairs
* Appliances and fixtures
* Landscaping
* Painting
* Occupancy time frame
Counter offers happen frequently. Remain in close contact with your
real estate agent so you can quickly review any changes from the seller.
Remember...bargaining is not a winner-take-all deal. It is a business
process that involves compromise and mutual respect.
STEP 7 - SERVICE
PROVIDER COORDINATION
After your offer is accepted, your agent will help you coordinate the
activities of service providers and serve as your advocate when working
with them. Your agent will make sure these vendors have access to the
property to perform their procedures and will oversee the execution
of those procedures on your behalf.
One service you may need is a home examination. An inspection of the
property, the foundation, and the surrounding environmental may be needed
to make sure the property meets the standards set forth in your written
agreement. If there are issues or inconsistencies brought to light during
this time, it may delay or even nullify the contract.
Insurance is another item that will need to be taken care of. Experts
recommend you obtain title insurance equal to the full replacement value
of the home. This kind of insurance is purchased at closing and protects
the buyers in the unlikely event that the title to the property becomes
invalid. Homeowners insurance protects against theft, fire and liabilities.
It often includes things such as bicycles, furniture and jewelry. Flood
insurance is generally only necessary for flood-prone areas. The federal
government issues this kind of insurance.
In addition to aforementioned types of insurance, you may want additional
assurance for your new home. Home warranties are one way to protect
yourself after you buy. Warranties for new homes protect against plumbing,
wiring and structural defects. Existing home warranties cover things
like major appliances and structural problems.
Having these procedures done in a timely and professional manner is
a must. Investigate each service provider to make sure they are reputable
and have a clean operational history. Your agent's experience in this
area will be invaluable.10 Steps to Owning Your Own Home
STEP 8 - BEFORE
YOU CLOSE
As the closing date (otherwise known as settlement or escrow) draws
near you will need to be in contact with the escrow company or closing
attorney and your lender to make sure all necessary documents are being
prepared and will be delivered to the correct location on the appropriate
date. Find out what form of payment you will need to bring to the closing
for any unpaid fees. Make sure that your payment is made out to the
appropriate party.
These days, buyers and sellers don't even have to be in the same room
to close a deal. Thanks to computer automation, signed paperwork can
be delivered overnight to both parties.
STEP 9 - CLOSING
ON A HOME
Closing is where ownership of the home is legally transferred from the
seller to the buyer. It is a formal meeting that most parties involved
in the process will attend. Closing procedures are usually held at the
title company's or lawyer's office. Your closing officer coordinates
the document signing and the collection and disbursement of funds.
In order for the closing to go smoothly, each party involved should
bring the necessary documentation and be prepared to pay any related
fees (closing costs). There may be more than one form of acceptable
payment for your closing costs so ask the closing officer which form
of payment will be required and to whom it should be paid.
Sellers sometimes pay for a portion or all of the closing costs, depending
on local market conditions, terms of the purchase contract, and the
seller's cash and timing considerations. Any such concessions should
be acknowledged in writing. Most lenders will allow a credit from the
seller to the buyer for the non-recurring closing costs. However, they
usually won't allow a credit that reduces the amount of the buyer's
down payment or any of the buyer's recurring costs, such as expenses
for fire insurance premiums, private mortgage insurance (PMI) or property
taxes.
STEP 10 - POST-CLOSING
Congratulations on the purchase of your new home!
Now that you have taken ownership of it you will need to have your electricity,
cable and phone set up. Also be aware of typical homeowner expenses
such as Neighborhood Association fees, landscaping costs, and annual
taxes and budget for them accordingly.
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