10 Steps to Buying a Home

1. You’re ready to stop paying your landlord’s mortgage payment, and start building wealth of your own.

2. You could use the property tax and mortgage interest deductions.

3. You want a vested interest in your community.

4. It’s mid-August and you can no longer tolerate waiting for your landlord to send someone to fix your air conditioner.

5. You are working at a job where you won’t leave the country every other year.

6. You want to provide your family with a sense of stability and plant roots.

7. There are more than twice as many people as bedrooms in your current residence.

8. You want to paint the walls of your bedroom any color you please.

9. You are tired of saving all your quarters for the laundromat.

10. When you say you are “going home,” you want to really mean it!

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 100percent, but it is more likely the two lists will turn into a list ofpriorities, as you get clearer about what you want and what isavailable.

STEP 2 – PRE-APPROVAL VS. PRE-QUALIFICATION

Now that you know what you want in a home, you need to find out whatyou can afford. There are two ways to go about this: prequalification orpre-approval for a loan. Either way, you can contact your agent aboutchoosing a mortgage company. Prequalification is the simpler of the twoprocesses. It can even be done online or over the phone. When youcontact a mortgage company, they will ask you for some basic informationabout your finances ? how much money you earn, your debt load, etc.They will take this information and give you a rough estimate of howmuch of a loan you might qualify for.

Pre-approval is more a more in-depth process. The lender will performan extensive check of your finances including your credit rating,whether or not you’re a first-time buyer, what your debt load is, howmuch money you have to put as a down payment, etc. This figure will be amuch more reliable estimate of what you can afford.

In most markets, pre-approved buyers are preferred over those thatare merely pre-qualified. Being pre-approved lets the seller know youhave gone through an extensive financial background check and thereshould 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 youcan 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 neighborhoodthe house is in. Think about that…if you found the perfect house but itwas in a neighborhood that was not to your liking, would you make anoffer on it?

You will need to make another list for the type of area you want toinvest in. Consider things like drive time to work and majordestinations, 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 andthe type of area you will want to invest in. Taking that informationinto consideration, you are ready to embark on your home search. If youdon’t know much about the city to which you are moving, you will want tostart by finding areas that meet your criteria and then narrowing yoursearch to particular properties in those areas.

There are a few ways to go about this. Possibly the most efficientway to find homes is to allow your real estate agent to keep youup-to-date on available properties that meet your criteria, and thenallow your agent to screen them for you. When your agent presents youwith a home that interests you, he or she can arrange for you to tour itat your convenience.

You can find available homes by reading local real estatepublications, contacting local Neighborhood Associations, visiting thelocal Chamber of Commerce, looking on the Internet, or driving throughneighborhoods that meet your needs. Driving around a particular arealooking for a home that is for sale is good because you can actually seethe 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 byreviewing recent sales of homes that are similar in size, quality, andconveniences and amenities. Your real estate agent will advise you onhow to create an offer that will have the best chance of being accepted.

After consultation with you, your agent will create a writtencontract with your offer that meets all the local and national legalrequirements. This document details what needs to be done by bothparties to execute the transaction. It should protect the interests ofboth 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 haveany questions or concerns, be certain to address them with your realestate agent right away.

STEP 6 – NEGOTIATING TO BUY

Once your offer is made you may need to negotiate with the seller toreach an agreement. Keep in mind almost everything is negotiable whenyou are buying a house. This can give you a great deal of leverage inthe buying process, that is, if you have adequate information and youuse 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 yourreal estate agent so you can quickly review any changes from the seller.Remember…bargaining is not a winner-take-all deal. It is a businessprocess that involves compromise and mutual respect.

STEP 7 – SERVICE PROVIDER COORDINATION

After your offer is accepted, your agent will help you coordinate theactivities of service providers and serve as your advocate when workingwith them. Your agent will make sure these vendors have access to theproperty to perform their procedures and will oversee the execution ofthose procedures on your behalf.

One service you may need is a home examination. An inspection of theproperty, the foundation, and the surrounding environmental may beneeded to make sure the property meets the standards set forth in yourwritten agreement. If there are issues or inconsistencies brought tolight during this time, it may delay or even nullify the contract.

Insurance is another item that will need to be taken care of. Expertsrecommend you obtain title insurance equal to the full replacementvalue of the home. This kind of insurance is purchased at closing andprotects the buyers in the unlikely event that the title to the propertybecomes invalid. Homeowners insurance protects against theft, fire andliabilities. It often includes things such as bicycles, furniture andjewelry. Flood insurance is generally only necessary for flood-proneareas. The federal government issues this kind of insurance.

In addition to aforementioned types of insurance, you may wantadditional assurance for your new home. Home warranties are one way toprotect yourself after you buy. Warranties for new homes protect againstplumbing, wiring and structural defects. Existing home warranties coverthings like major appliances and structural problems.

Having these procedures done in a timely and professional manner is amust. Investigate each service provider to make sure they are reputableand have a clean operational history. Your agent’s experience in thisarea will be invaluable.

STEP 8 – BEFORE YOU CLOSE

As the closing date (otherwise known as settlement or escrow) drawsnear you will need to be in contact with the escrow company or closingattorney and your lender to make sure all necessary documents are beingprepared and will be delivered to the correct location on theappropriate date. Find out what form of payment you will need to bringto the closing for any unpaid fees. Make sure that your payment is madeout to the appropriate party.

These days, buyers and sellers don’t even have to be in the same roomto close a deal. Thanks to computer automation, signed paperwork can bedelivered overnight to both parties.

STEP 9 – CLOSING ON A HOME

Closing is where ownership of the home is legally transferred fromthe seller to the buyer. It is a formal meeting that most partiesinvolved in the process will attend. Closing procedures are usually heldat the title company’s or lawyer’s office. Your closing officercoordinates the document signing and the collection and disbursement offunds.

In order for the closing to go smoothly, each party involved shouldbring the necessary documentation and be prepared to pay any relatedfees (closing costs). There may be more than one form of acceptablepayment for your closing costs so ask the closing officer which form ofpayment 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 concessionsshould be acknowledged in writing. Most lenders will allow a credit fromthe 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’sdown payment or any of the buyer’s recurring costs, such as expensesfor fire insurance premiums, private mortgage insurance (PMI) orproperty 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 yourelectricity, cable and phone set up. Also be aware of typical homeownerexpenses such as Neighborhood Association fees, landscaping costs, andannual taxes and budget for them accordingly.