Thinking about buying?
Whether your first home, or your tenth home, purchasing a house is a big investment. It is important that you make the right decisions and find the right home. Below are the steps you will need to take when purchasing a home.
Determine how much you can afford.
We can refer you to some resources that can help determine this amount. This also can depend on your approval and you may need to refer to your lender. We have lenders we can recommend you go to, including local lenders. It’s nice to be able to walk into an office or meet with a lender in person during the process.
Going to multiple lenders is a good idea usually to compare rates, but if you have a higher risk of getting a loan, it may be harder to shop around. You should get prequalified for a loan when you are ready to seriously start looking.
Find a great agent.
A real estate agent is a huge asset to you as you go through the home-buying process. This is one of the biggest decisions of your life and you need a skilled professional to guide you through the process. Your agent will be working with your best interests in mind and can help guide you through all the stages of home buying.
Start the search.
Your realtor can set up showings for homes that fit your needs and wants, work with selling agents, and help you during the walkthroughs of any homes you look at.
Make an offer.
After you find your dream home, it is time to write an offer! Your realtor will do an in-depth search of other properties that have sold in the area, and help you determine a fair price to offer on the home. They’ll help you complete the paperwork and send it to the listing agent. At this point, the Seller can accept your offer, counter it, or simply turn it down.
There are several decisions and tactics buyers use nowadays, that you may consider consider when writing offers:
Escalation clause - This is a pledged offer amount or percent above any competing offer, up to a cap price.
Waiving home inspection - If you’re comfortable with that, it is becoming more common.
Appraisal gap - Guaranteed amounts - no matter what it’s appraised for, a price floor is promised to the seller.
Earnest money deposit - Earnest money is a deposit to the seller that they keep if the buyer doesn’t purchase the home. Basically, it is protection that the buyer won’t turn down the home based on a small issue in the inspection. The buyer would lose this deposit if they found something big in the inspection and decided not to buy.
Personal letters to the seller
Writing a buyer’s personal letters to the seller, telling them who is buying the home, and why you love the home, can make a personal connection.
The escrow period.
During the escrow period, the home inspection, appraisal, title insurance, and loan approval will be completed.
Close on your home!
If you’re in a hot market and within a certain price range, you can expect there is a deadline for offers. Your agent will let you know how many offers you can expect to compete with. You usually hear within 24 hours after the deadline if there are multiple offers. If there is only one offer and no deadline, you can also expect to hear back quickly.
At closing, you’d go to a title company. You should have your itemized closing costs in hand, and you’ll get the official statement before the appointment with the title company. Usually closing costs are around 3% of purchase price if you’re escrowing your taxes. If not, they can run around $2500.
Bring a cashier’s check for the closing costs to the title company, and a form of ID, like a drivers incense, or passport. The timeline from offer to closing is usually between 30-40 days.
Home Buying FAQ
It is difficult. There are alternative financing options, but there is no easy way to buy with bad credit. Your target credit score should be 630 or above. If you are close to that, there are ways different lenders can help you find ways to raise your credit score quickly. Unless you have a bankruptcy or foreclosure on your report, within a year you can make a lot of difference in your credit score with some focused effort and the help of your lender.
If you qualify for a VA loan or a rural development loan, you can. You’d want to find a lender who works with those types of loans if you qualify for either one of those. Some lending programs have 1% down options, or even down payment assistance, but they're not as prevalent.
FHA loans typically ask for 3.5%. With really good credit scores you can get as low as 3% down with a conventional loan.
As far as costs of working with a realtor, note that realtor fees are not the best setup for the buyer, compared to agent success fees. Agent success fees are paid when the deal is done at closing rather than paying before, or during the search.
Prepare for a good faith or earnest deposit in the case of an accepted offer. That amount depends on the price of the home, and you lose it if you walk away after the 10 day inspection period. Otherwise, it’s credited at closing or returned if you find something in the inspection that causes the offer to be cancelled.
Consider the cost of home inspections as well, which can run around $400-$500 and up.
There are a lot of misconceptions about first time home buyer loans. Sometimes some areas or lenders have these kinds of incentivized loans, but most do not truly offer first time home buyer loans.
We do get notice sometimes on houses that are coming up on the market soon, or that have sellers who desire limited offers or showings to their listing.
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