Congratulations on your desire to purchase the American Dream. Now that you have begun the process of buying your new home, we would like to share with you the process to help you better understand the procedures involved in buying a home:
1) Loan Pre-Approval
It is in your best interest to be pre-approved by a lender. This allows both you and the seller to have a higher level of confidence that the sale will successfully close. It will establish a positive framework in which to negotiate the best price and terms for your purchase by effectively making you a “cash buyer”. Pre-approval requires completing and verifying a loan application.
2) Credit Checks
To preclude any surprises or delays in obtaining your home loan, your lender should run a credit report at the beginning of your home shopping. If there are any errors in your report, you will want to resolve them immediately. A 'good' credit report will carry a great deal of weight with the seller during negotiations.
3) Earnest Money Deposit
When you write an offer to purchase a home, you will submit an 'earnest money deposit' with the real estate company. Typically, this will need to be about 1% of the sales price of the home but is often only $500. If the contract fails due to a loan denial, low appraisal or your disapproval of any inspections before the contract deadlines, the earnest money will be refunded to you. State law strictly governs the disposition of these deposits so you don't need to worry about the disposition. Once the offer has been accepted, your money can only be released by the terms of the contract, agreement of both you and the seller, or by court order.
4) Interest Rates and Lock-ins
Interest rates and loan points may vary from day to day. Neither your lender nor me as your Realtor has any control over these variances. Many lenders and loan programs will allow an interest rate “lock-in” for 45-60 days. If you don't close by the lock expiration date, your interest rates and/or costs may increase.
5) Estimate of Monthly Payments
Your estimate of monthly payments will be based on paying the principal (the actual loan amount), interest, taxes and homeowner’s insurance cost (PITI). Depending on what you buy, you may also have a monthly Home Owners Association Fee (HOA). If your down payment is less than 10%, you may have Mortgage Insurance as well.
6) Estimate of Closing Costs
Your lender and Title Insurance Officer will review an estimate of the amount of monay required to close on your home. It is important to remember these are estimates only and there could be some variations on the actual day of closing.
7) Up-Front Loan Fees
Most lenders require that the credit report and appraisal fee be paid up-front when the loan application is taken. These fees, which are typically less than $600, are non-refundable but are included as part of your closing costs.
8) The Home Search
Normally, you only need to look at 6 to 10 houses before locating a home you will want. However, if you want to keep looking, just let me know. Once I really understand what you are looking for within your price range, almost every home in the area will eliminate itself. I study the market regularly and will show you the 3 to 4 homes at a time. Looking at any more than 3 to 4 at one time will be counter productive as they will all blend together. If one of these is not 'your home', we will continue looking until you find the best one for you.
9) Loan Processing
When you apply for your home loan, you will need:
- Addresses for previous 2 years
- Previous home loan numbers or your landlord’s name and address
- All credit card numbers and loan numbers along with their mailing addresses
- Previous two month’s bank statements and last two pay stubs
- Last two tax returns and/or W-2’s
Verification for required information will be mailed out. The time from loan application to settlement and closing will vary; usually 6-8 weeks. Delays may occur for any number of reasons. It is imperative that you respond IMMEDIATELY to requests for additional information from the lender to preclude any delays on your part.
10) Home Inspections
In the Purchase Contract you will be given a couple of weeks to conduct 'Buyer Due Diligence.' If you discover anything to your disliking, you can cancel the contract and have your Earnest Money returned. We strongly urge you to have your home professionally inspected during your negotiated inspection period. A professional home inspector will go over the home in complete detail. Many minor items will appear on the report. Do not be
alarmed, Ir will help you resolve major concerns about your house.
11) Title Insurance
After your loan has been approved, the Title Insurance Company will do a title search. If there are any problems, I will keep you informed of the seller's efforts to resolve them.
12) I will Communicate with the Seller
If you have any questions for the seller or other concerns, or just want to look at the house again, call me and I will get you answers. Buying and selling a house can be stressful so please let me help.This will prevent any misunderstandings between you and the seller.
13) Final Walk-Thru
A few days before closing, you have the right to conduct a final walk-thru inspection of the property. This walk through is to verify that what is included in the sale is still there, items negotiated to be repaired during the inspection period are repaired, and the heating, air conditioning, electrical and plumbing systems, and major appliances included in the saleare in working order. Unless substantive changes have occurred with the property, no other items may be considered during the walk-thru. Therefore, it is very important that any repairs you want done be written into the purchase contract at the beginning.
14) Homeowner’s Insurance
As soon as you agree on a purchase, you will need to talk to an homeowners insurance agent. Be sure your insurance agent knows the lender's insurance requirements. An insurance binder must be at the Title Company PRIOR to closing.
15) Have Certified Funds Ready
A day or so before the Settlement, the Title Company should get final figures from the lender and work up a settlement sheet and will let you know the exact amount. Bring in certified funds from a bank to insure the closing isn’t delayed.
16) Settlement and Closing
This is the final step in purchasing your home. At the Title Company, you will sign the forms provided by the lender to finalize the loan and the seller will sign the Warranty Deed. Once everything is signed and the loan is funded, the Warranty Deed will be recorded at the County Recorder’s office and the home is yours.
17) Expect Buyer's Remorse
It is not unusual for buyers to question their decision after they sign the contract. You are normal! Remember that much planning and information went into your decision, take a deep breath and bet ready to move.