Cliff Notes to Buying a Home
- Find Home
- Make Offer on Said Home
- Offer Accepted
- Close on Home
- Move In
Typical Home Buying Process
- Find a Competent & Trusted REALTOR®
- Find a Competent & Trusted Lender
- Get Lender Approval
- More Homework
- Hit the Road
- Make an Offer
- Monitor the Loan
- Utilities and Services
- Final Walk Through
- Closing Time
- Get Keys & Move In
Detailed Home Buying Process
- Homework - do some leg work to find out if buying makes sense for you. Will you move a lot with your current job, do you need a bigger home, do you need to downsize, is it a good time to invest in homes, is home affordability still at an all time high, is your financial outlook stable, will buying now increase your net worth in the short/long term, etc. are some things to consider.
- Find a Competent & Trusted REALTOR® - don’t be afraid to interview the agent that is representing one of the biggest financial decisions of your life. Not only is there a lot of money at stake, but the process should be as smooth and stress free as possible. A strong, experienced REALTOR® will not only negotiate aggressively on your behalf, but also guide you seamlessly through this complex process. You want someone that will look you in the eye and tell you that maybe you should NOT buy a particular home and explain why. No deal is better than a bad deal. Remember you are hiring this person to give you their professional advice. So when they give the good, the bad and the ugly remember not to take it personally. It is good to have someone in your corner that can manage your emotions during a highly emotional process! Sometimes it may be easier to work with someone who isn’t a friend or family member, too.
- Find a Competent & Trusted Lender - just how finding a great REALTOR® can make a world of difference, so can a great lender. Of course you want someone that can accurately tell you the figures. More importantly you want someone that will be honest when buying a home may or may not make sense. A good lender doesn’t just close a bunch of deals. They also stop someone from getting into a bad one! Real estate is a great way to build wealth with the right people on your team. You want someone that will explain in detail why borrowing from your retirement may not make sense. You want a lender that will explain the downfalls to down payment programs. If you are going to finance this purchase… DO NOT put this part off! No matter what you think you will or will not be approved for, have a conversation with the trusted lender. If they believe buying is a possibility, then complete the application! You may be surprised how easy it is… and it’s free! Without the application the lender and the REALTOR® won’t be much help to you!
- Get Lender Approval - this doesn’t mean just a quick online application with an approval amount based on the information your input. You want this approval after the lender has verified your income, assets, taxes, credit profile, debts (including alimony or child support), employment and/or profit and loss statements. This eliminates any surprises and will allow you to narrow in on that payment you desire.
- More Homework - start showing online to find the type of home you like. Find out what areas are attractive to you and your family. Check into schools, HOAs, commutes, growth, surrounding, etc.
- Hit the Road - start touring some homes in the areas you like with your REALTOR®. Don’t be afraid to walk in an open house and take a look. Check out the community at different hours of the day. Find out how busy the roads are in the mornings and afternoons. See if there are lots of kids outside playing. Find out if the railroad and airports nearby are active!
- Make an Offer - Once you’ve found the home discuss the current market and factors affecting that home and submit a formal offer. Agents understand that you want the best deal possible and of course they want to get you one. However, listen to their feedback and work together to determine the not just the offer price, but the terms, too! Remember you hired a professional for their advice. So make sure to consider it when making that offer. Otherwise you may lose a several homes before getting an accepted offer.
- Inspections - this is a huge investment so you want to make sure you are getting what you’re paying for. You will want to hire a home inspector at the very least. They are like a general practitioner because they look at the home and its systems as a whole. If there is a problem with a specific “system” they will explain it to you and likely recommend a “specialist” like an electrician. Other inspections can include, but are not limited to; foundation reports, structural engineer reports, roofing, HVAC, mold, lead based paint, terminate or wood destroying insect reports, well tests, septic inspections, static plumbing tests, video drain inspection, green efficiency to name a few.
- Monitor Loan - there will be things the lender needs as the home gets closer to the closing date. It could be updated bank statements or a quote from the home owners insurance company that you would like to insure your home and belongings. Your REALTOR® and lender should be in constant contact with you so nothing is missed!
- Appraisal - the majority of purchases involving a loan will require some type of appraisal. This is just an independent person’s opinion of the home’s value. It allows the lender to confirm that they are loaning money on a valid asset. If it comes in high… congratulations your REALTOR® did a great job negotiating and you have instant equity! If it comes in low… you will be faced with some options in order to get the loan from the lender. Hopefully you can get the seller to lower the price to the appraised amount. If not, you may want to negotiate a new price and/or terms to make it work. If that fails then you would need to bring more cash to closing to offset the difference in the appraised value and the loan amount. If you don’t have the cash then this could ultimately lead to the termination of the contract. That is why it is very important to take your REALTOR®’s advice when submitting an offer. Just because you really, really, really want the home doesn’t mean you should offer $25,000 over the asking price. If you are not prepared to pay the difference and you have to terminate the contract… you probably just wasted a bunch of money. This can be very confusing… please ask any questions to help you understand this!
- Utilities & Services - the appraisal is back and everything is good. The lender is probably running your file through the final underwriting and you are almost in the clear! Now you can start setting up utility transfers, such as; water, sewer, trash, internet, phone, security, etc. Also, make sure your knock out your change of addresses! You can also finalize those movers!
- Final Walk Through - again, this is a huge investment. You want to make sure you and/or your agent physically checks the home as close to the closing time and date as possible. Once you sign and the deal is funded, you own it with or without and defects. It could be something as simple as the sellers scratched the wood floors when moving out to the home flooded last night! The home should be handed to you in the same condition as when you made your offer or with any repairs the seller agreed to make before closing.
- Closing Time - all of your hard work, your REALTOR®’s hard work, your lender’s diligence has paid off! Now you sign the final documents. Once you and the seller sign, the title company verifies the documents and sends them to the lender. Once the lender reviews and okays the documents, the lender will send the money to the title company to disburse to all the involved parties including the seller. At that moment, your deal has “funded” and you are now the owners! FYI… you don’t actually have to be at the title company! We’ve had clients close internationally when needed!
- Get Keys & Move In - the transaction has funded, now you get your keys! Call your friends and the movers and tell them to hurry up! Congratulations!!!
*** When financing your home please check with your lender before opening any credit accounts! It will be tempting to run to Nebraska Furniture and pick out some new furniture, televisions, etc and utilize their 0% financing. However, that simple credit check could kill the loan! Even if it was just a $25 per month payment!!!