Tuesday, July 13, 2010

home buying 101

The universe is merely a fleeting idea in God's mind - a pretty uncomfortable thought, particularly if you've just made a down payment on a house.
-Woody Allen, American screenwriter, film director, actor, comedian, musician, and playwright

Buying your first home can be an exciting adventure...it can also be completely overwhelming.  Becoming familiar with the home buying process beforehand can take away a bit of stress.  Here are some tips:

  1. Get pre-approved:  Deciding how much home you are going to buy depends on your income, debt, and credit score among other things.  There are many resources online that can help you understand how much you can afford, but most realtors are going to want you to have this pre-approval done before you go home shopping.  It makes sense because it helps us find the right house in your target price.
  2. Select a Realtor:  A house is one of the largest purchases you will make.  Why not take some time to chose an expert who has the skills, market knowledge and resources to guide the process?  One place to start is to ask friends/family for referrals.  You want to interview your Realtor because you are literally hiring them for the job of finding your house.  Be prepared to discuss what is important to you...and make sure they listen...this is key!
  3. Want List/Wish List:  Drive around your area, talk to people who live there, and go to open houses.  Find out what you really like about location, condition and style of homes.  The more educated you are on what you want, the more successful your Realtor will be in finding it.  Keep the want list/wish list mindset because no house is going to be perfect...what are the deal-breakers and what are things you can accept not having?  
  4. House shop:  Start online by looking at homes in your area.  Most of the initial selection can be done while you surf the web in your jammies.  Your Realtor can also send you homes via the Multi-List System (MLS).  Once you have narrowed your search, time to go driving to see the homes phyically.  Typically people need to see about 10-12 homes to know which one they want to purchase.  Seeing many more than this is just overcomplicating the process and will make it more difficult.  When you go into a home, ask yourself:  "Could I see myself living here?"  Three things to consider in order of importance:  Location, Price, Condition...the first thing you can't change, but the other two are negotiable.
  5. Investment:  A first home is typically not your last home you will purchase, so consider the investment value.  What activity is the neighborhood experiencing?  How have home values held over the years?  Your Realtor can do a comparative market analysis to help you understand this.
  6. Papers, Papers, Papers!  As in any contractual process, there is a lot of paperwork!  Ask your Realtor to review all the terms with you...you are taking a big step, and you need to know what your obligations are.
  7. Disclosures:  Most jurisdictions require property disclosures that explain what has been done to the property, the condition of the property as well as what will be included in the sale price.  It is important to carefully review this because once you sign the disclosure statement, you are agreeing to the terms.  Make sure you ask for additional information to clarify any issue before signing. 
  8. Home Buying Process:  Once you find the home of your dreams and are ready to make an offer, the process really takes off, and your Realtor should be able to help you manage the negotiation of the price/terms you will accept.  First, the seller will receive/review the offer...and possibly make a counter-offer.  You then have the opportunity to review the counter if there is one, or if the seller accepts your offer, you have a contract to buy that home.  The next steps deal with home inspections (structural, termite, radon, etc depending on your locality) and financing (which bank is going to give you the money for your purchase?).  This part of the process can take a few weeks, and it is important that your Realtor help you navigate smoothly.
  9. Home Warranties:  Having a home warranty on a property can be a big plus because they can provide repair or replacement coverage of major home operating systems and sometimes appliances.  This provides peace of mind...especially for your first time owning a home.
  10. Walk this way!  Before you finalize your purchase, it is important to do one last walk-through to verify that the property is in the condition that you agreed upon.  You also want to insure that any require repairs have been completed.
  11. Settlement:  At settlement or closing, you will be signing to take title of the property.  Before this can happen, many actors have to have done their work.  Here are some of the basics: 

    1. A title company does a search on the property to make sure it can indeed be transferred to you without liens or incumbrances.
    2. The bank has to have your mortgage ready to go.
    3. Insurance needs to be provided to cover your new home.
    4. Inspections have all been complete and repairs made.
    5. You have to have money for any closing costs.
    6. There are more items such as having the utilities turned on, moving companies, etc. which your Realtor can assist.
Pride of home ownership is a huge part of the American dream!  While the process can be overwhelming, help is available to make sure the process goes smoothly.  If you have any questions...I'm just a click away!