The Home Buying Process
The very thought of buying a home is exciting for a first time home buyer as well as the experienced home buyer. The process is somewhat complicated but a careful preparation can make it a smooth sail. Here is the description of each stage in the Home Buying Process and how Estate Zone can help in making it a successful transaction.
Plan and prepare
This is the first step in the buying process and typically starts a few months before you start looking for houses. Starting to make calculations like how much price you can afford, the amount of down payment you can arrange, the location of a house ( keep some margin here ) and school districts that you want. Age of the home is important too. Newer homes will be more expensive. More popular school districts will cost you approximately 10% to 15% more but will be easier to sell in future. Once you’ve considered the down payment, make sure you’ve enough to cover fees and closing costs. These may include the appraisal fee, loan fees, attorney’s fees, inspection fees, and the cost of a title search. Once you have found the answers for most of the above-mentioned puzzles, you will need to contact a lender to get a pre-approval letter if you are like most buyers who need a home loan to buy a house.
Get a Pre-approval Letter
Lenders qualify and pre-approve buyers based on a combination of factors. Some of the important factors that play an important role in determining the amount of approval are:
1- Income ( Joint income if two or more are applying for a loan )
2 – Credit Score
3 – Debt level ( This includes car loans, appliance loans, credit card debts, student loans, existing mortgage and more )
4 – Bank Balance
The lender will ask you for a bunch of documents to put your information in their system to figure out how much of a loan you may qualify for. This would also be an opportunity for you to ask the lender about different kinds of home loans and which one would be more suitable in your situation. Down payment requirements can typically vary from 3.5% to 20 % depending on the type of home loan. The lender will then issue you a pre-approval letter which serves two main purposes. First, it gives you an idea of how expensive a house you can afford and second, most sellers will need this letter to consider your offer. without pre-approval, your offer on a home may not be taken seriously. Please do not rush to get this letter after putting an offer. It may be too late. While you are trying to get this letter, you may contact your Real Estate Agent / Broker.
If you are buying an all-cash property out of your own funds, you do not need a pre-approval letter. You need to provide a Proof of Funds ( POF ) to the selling party. Sometimes, a seller may ask for both to ensure that the buyer has a strong financial background.
Have a meeting with your Real Estate Professional
Now is a good time to meet your agent and plan a home buying strategy. ( We love to have a meeting with client at or before this stage ) You will have a lot of questions. ( Every buyer has! ).Get the answers. Discuss everything including locations of your choice, school districts, price range, special needs ( like Bedroom on the main floor, need for a basement etc ), the age of the house, buyer rebates from the agent’s commission and more. Signing a buyer agency agreement with your broker is important as it makes it possible for the broker to contribute towards buyer’s closing cost if the buyer is eligible for one. It is a two-way commitment from either party. A buyer’s representative has the same access to homes on the market that a seller’s agent does, but his or her allegiance is supposed to be only to you. Click HERE to request a meeting with Estate Zone Agent. This meeting helps to get answers that the buyer may have for the home buying process.
Start the Search
We at Estate Zone spend a lot of time to create your profile and formulate your search criteria to pick out the homes that match your needs. Every home information that we send you is carefully and manually verified to ensure that we provide you information on the homes that fit into your requirement keeping some margin. Alternatively, if you see a listed home online and want us to get an appointment, please make sure that it has gone through the checklist of your requirements like the school district, location, age, design etc. We would be happy to arrange a showing of such a home to you after you put it through your checklist. Once you come across a home that you want, let us make an offer…soon. Waiting too long to take a decision may result in this home going to another buyer.
Make an offer
Let your agent prepare an offer. At Estate Zone, we create the offer carefully making sure that all the contingencies like finance, appraisal, due diligence, closing date and more are included in the offer after we discuss the offer price with you. A carefully drafted offer goes a long way in protecting the buyer. Ernest money check must be provided to the broker at or before the time of sending an offer. Real Estate Industry has been increasingly using electronic signatures for sending & receiving offers. It is a very efficient way to get things done quickly across the city, state, and countries.
After an offer is sent to the seller, it may take a few counter offers till mutually acceptable terms are reached and an offer is accepted. Typically, first 7 to 10 days after offer acceptance are usually for due diligence. Buyer quickly gets into action after offer acceptance. Inspection is ordered and the lender is advised to arrange for an appraisal. Buyer is able to withdraw the offer during this due diligence period if any negative information is found about the property. A copy of a binding contract( signed & accepted ) is provided to lender and closing attorney to start their part of a transaction. Final approval of home loan can typically take around 30 to 35 days if all the needed documents are supplied by the buyer quickly.
In a seller’s market, the process of making an offer and getting it accepted can get frustrating for the buyer due to supply and demand mismatch of the homes on market. Too many buyers chase few good homes that are available. At such times, creating an offer that stands a better chance of being accepted is a challenge. Such a challenge can be successfully met with buyer’s cooperation and agent’s creative planning. This is particularly true for year 2018 as we have a very low inventory of saleable homes.
Wait for loan commitment
Remember, the preapproval letter that was issued to you was just that, not a loan commitment. Now that your offer is accepted and assuming that no negatives are discovered about the property, you may start dreaming about your new home…and why not? But wait a minute, Till you close on your new home…
Here is a list of things that may go against the final approval of loan:
1 – Avoid any big purchases like a car, appliances, overseas tours etc. Even when you buy them on installments, your available credit amount goes down. You may not get expected amount of loan.
2 – Avoid changing the job. This may have a negative impact on your ability to get a loan.
3 – Not having enough cash on hand ( provide for some additional unexpected expenses ) may give you last moment stress.
If all goes well, the lender will issue a loan commitment letter on request. It may come just a few days before closing. Now is the time to prepare for grand finale of buying process, the closing.
Prepare for closing
Lender would provide a CD ( Closing Disclosure ) to buyer and seller 3 days before the closing. Please go through this disclosure carefully as it lists all the expenses fees and commissions involved in the process. Make sure that your expenses are correctly noted. We can help you with it.
Make arrangements for out-of-pocket cash that you will require at the closing. Having some extra cash is always a good idea. When the time comes to sign, please check your name is spelled correctly. Bring your photo ID & a couple of blank checks to the closing. Please try to relax during the closing process. It helps. Closing usually takes place at closing attorney’s office. You’ll sign, read and sign papers and then read and sign some more. Even though you’re just sitting around a table, it can be exhausting. But it also means you’re nearing the finish line. If buyer and seller are in different cities or states, the closing attorney makes arrangements to send Notary to seller and buyer to complete the closing. Money is transferred to the seller via wire transfer which may take from a few hours up to a business day. Your contract specifies when the keys will be given to you.
Estate Zone would be happy to provide needed guidance and answer your questions during this period and beyond.