Admin. note: Here’s a good home-buying overview article. We will be going more deeply into each step of the process of buying a home over the coming weeks. As we always stress – don’t get emotionally over-sold in the process, and don’t skip a step that you see below. There are plenty of homes in the sea of real estate.
Buying a piece of real estate for the first time is an exciting life event and can be somewhat of a challenging process. There are so many things going on, with so many parties involved. It’s easy to get confused about what to do next in what seems to be an overly complex maze of legal formalities. This article will explain, in easy terms for the inexperienced buyer, how the process works.
Step 1. Loan Pre-Approval
The first thing to do when you are looking for a home is to get yourself pre-approved for the home loan. This will involve completing paperwork about your income and assets. Once you complete that process, you will know how much money you have available to spend for your home purchase.
Step 2. Searching for Your New Home
Start looking. It is good to begin your search in earnest already having defined what you actually want. You can define your ideas in a systematic way, by making a list.
Step 3. Identify Home
When You find your dream home, you’ll know it. The right home for you might be the very first home you find or the thirtieth.
Step 4. Making the Offer
Before making a formal offer, put some appropriately serious research behind it. Learn what properties in the area have recently sold for. Make a fair offer — if it is too low you could all too easily alienate the seller; if it is too much you could end up paying more than you have to. In most cases, when you make an offer, you will need to put up anywhere from 1% to 3% of the asking price in “earnest money.” Your offer will cover the terms and contingencies that you want in addition to price, such as inspection, any needed repairs, and your desired closing date.
Step 5. Acceptance of the Offer
After a little negotiation back and forth, the seller and you will reach agreement on terms.
Step 6. Title Review
A title review, in most jurisdictions in, is normally conducted by a real estate attorney who researches the title, or ownership history of the home, and gives a formal opinion as to whether the seller’s title is clear and meets the terms of the contract to which you have agreed. In some states this is done without a lawyer but almost without exception there will be a requirement for a title search.
Step 7. Home Inspection and Necessary Repairs
Getting an independent inspection is important. An inspection can reveal problems that could be significant, from a furnace problem to a crumbling fireplace. If the inspection shows problems, you will have to discuss and negotiate repairs.
Step 8. Appraisal
An appraisal is a formal estimate of the home’s true value. No lender will be able to lend you a larger amount than the appraised value of the property. If the appraisal comes out lower than the selling price, your deal is in serious trouble. Solutions include the buyer adding in the difference in cash, the seller agreeing to lower the selling price to match the appraisal, or the seller and the buyer getting a different appraisal. This subject has come under increased scrutiny recently, so be careful.
Step 9. Final Loan Commitment
You will feel a big sense of relief when the lender completes a final review of your documents and approves your loan.
Step 10. Final Walk Through
The walk through takes place a few days to a few hours before closing. During the walk through inspection, ensure that the home is in the shape in which you agreed to purchase it. All repairs required of the seller need to have been accomplished satisfactorily. The final inspection is your chance to ensure that the home has not been damaged or altered since you contracted to purchase it.
Step 11. Closing
Closing is the transfer of title to you, as the buyer,. As the buyer you will have to pay the down payment on the property and your part of the closing costs. Before the day of the closing find out exactly how much money you will need to bring at closing.
That’s it! You’ve made it through. Once you’ve accomplished these steps, you’ll have your dream home.