Thursday, September 28, 2023 / by House Search Support
The home buying process is one of the most tedious process a person can ever come across in the Real Estate Industry especially with first time home buyers. Purchasing your home will be one of the most enormous decisions you will ever make and helping you understand every step along with its pros and cons (besides from handling you the key) is my ultimate goal.
To guide you accordingly, here’s a simple checklist to track where you are in the process of buying your home:
Part 1: Planning and Preparation
1. Initial Consultation
- Besides from knowing your home preferences and/or expectations, it is critical to also get to know about our client’s profile, your profile. This is an opportunity to sit down with you and hear about what you are looking for in a home as well as your priorities in the deeper context of your life and lifestyle. This shall be a great help especially in identifying properties that will be shown to you which will save a lot of time and effort in touring homes and show you the best of what the market has to offer. This is also the best time to discuss neighborhood preferences, timeframes, budget, lending qualifications, availability. Do not be afraid to ask questions as this will form a big part on the entire buying process.
2. Get preapproved with a lender, if applicable
- Pre-Approval in the Real Estate is like a Physical Examination for your finances. Before lenders decide to pre-approve you for a mortgage, they will look for several key factors:
o Debt to Income (DTI) Ratio
o Loan to Value (LTV) Ratio
o Credit History
o FICO Score
o Employment History
- This shall all be discussed as you go along with your chosen Realtor. Also, you’ll list all of your bank account information, assets, debts, income, employment history, past addresses, and other critical details for a lender to verify. The reason for all acquiring all these key factors is to assure the lender that you can repay the loan.
Part 2: Find a Home
3. View Properties
- Set search parameters. Monitor market activity. You can do online home shopping with your realtor so that you will be on the same page and figure out the best type of home, neighborhood, price point and schedule to view and visit homes at the best time that works for you and your busy schedule.
4. Review Disclosures
- The seller’s disclosure report is one of the most important documents in the home buying process. This could help protect buyers from hidden problems that could reduce their enjoyment or use of the house. Remember, this is a legal and binding agreement, so a dishonest seller who does not disclose or reveal known issues to the buyer can be held financially liable long after the house is sold.
- Most state-required real estate disclosure are made using a standard form. The typical disclosure form is a few pages long and describes features like:
o Roof, Foundation and other structural components
o Electrical, Water, Sewer, Heating and other mechanical systems
o Trees and Natural hazards (Earthquakes, flooding, hurricanes)
o Environmental Hazards, such as lead, asbestos, mold, radon, or contamination by the use of meth lab
- Some disclosure forms also cover legal issues, such as ownership problems, disputes concerning the property, and community association fees.
- The forms might even require information about suicides, murders, and other deaths on the property; nearby criminal activity; or factors such as excessive neighborhood noise or other things affecting a house's desirability or value.
- Sellers are basically responsible for disclosing only information within their personal knowledge—that is, they don't necessarily need to hire inspectors to turn up hidden problems. And they probably aren't construction experts, and might not have visited their own attic or crawlspace in a long time.
- If you're buying a new house that hasn't yet been built, the developer obviously won't have much to disclose—but might still need to tell you about things like the type of soil; previous uses of the property; possible future uses of surrounding land; and the developer's intentions regarding existing trees, streams, and natural areas.
5. Present offer to seller(s)
- Once you have locked down on your chosen home and/or property, next thing you’ll need to think about is the actual process of making an offer.
- Review comparable sales and discuss appropriate offer strategies with your realtor and prepare a detailed package.
- You’ll need to decide how much to offer, what contingencies you want and how much earnest you’ll deposit. The offer shall be made through a letter that you have worked together with your chosen realtor.
- Once the seller has received your offer, they can either accept of decline or request for changes and if they make a counteroffer, your realtor shall act as a liaison during negotiations.
6. Ratify Sales Contract
- They say that a contract has been “ratified” once the buyer and the seller has agreed to terms, but have not completed final execution. Once the contract has been ratified, it can still be cancelled before the final execution. Between contract ratification and closing, the seller will take care of any contingencies agreed to, and these other steps will take place. Some of the details vary by state but all will be explained by your realtor.
Part 3: The Escrow
7. Submit Deposit within 3 business days of Acceptance of Contract (unless otherwise stated in the Contract)
- Congrats! Your offer has been accepted, escrow has been opened. This becomes a binding sales contract, hence requiring the Earnest Money Deposit into an escrow account within 3 business days
- Earnest Money Deposit – In the real estate market, this serves as a payment made by a buyer to a seller in order to show that you are interested in purchasing a property/home. During this state of the sale, we call this a ‘conditional sale’. The remaining balance of the deposit is paid prior to your ‘unconditional’ due date, and this is when all the conditions have been met.
8. Work closely with lender to obtain loan, if applicable
- At this state, you are ready to apply for a final loan/mortgage. You’ll need to approach a mortgage lender, most likely the one who pre-approved you. Your lender should guide you as to what to send and when, but here are some of the information they’ll need in order to finalize the loan:
• Name of current employer, phone, and street address
• Length of time at current employer
• Salary including overtime, bonuses, or commissions
• Two years of W-2s
• Profit and loss statement if self-employed
• Pensions, Social Security
• Public assistance
• Child support
• Bank accounts (savings, checking, brokerage accounts)
• Real property
• Investments (stocks, bonds, retirement accounts)
• Proceeds from the sale of your current home
• Gifted funds from relatives (e.g. a down payment gift for an FHA loan)
• Current mortgage
• Child support
• Car loans
• Credit cards
• Real property
o Property information
• Street address
• Expected sales price
• Type of home (single-family residence, condo, etc.)
• Size of property
• Real estate taxes (annual)
• Homeowner’s association dues (HOA)
• Estimated closing date
o Credit history
- As for the credit history, this is one of the most crucial elements in getting your mortgage approved. Be prepared to explain any missteps in your financial background. It’s good to have dates, amounts, and causes for any of these parts of your history.
- One good tip? It is better to check your credit report beforehand to see where you stand. Everyone is entitled by law to one free credit reports from each of the three main reporting bureaus each year.
- You’ll be provided a loan estimate and you’ll get it within three business days from your loan application date which will also be valid within 10 days. If you decide to accept the loan offer, you are required to do it within the given time frame, otherwise, the lender may alter the terms and issue a new loan estimate if you take more time to decide.
- Once you’ve decided on accepting the loan estimate, your loan shall commence processing. At this point, your mortgage lender will start to go through and verify information provided to them which includes:
o Ordering a credit report
o Verifying Employment and bank deposits
o Order a property inspection and appraisal
o Order a title search
- Once loan is underwritten, the lender issues a final approval.
Part 4: Closing Process
9. Remove contingencies as necessary
- The contract specifies deadlines to remove any remaining contingencies, for example loan and appraisal. Once all contingencies are removed, you've cleared the last major hurdle to purchasing your new home!
- The contingency removal date is the date defined in the purchase offer specifying when the buyer will remove contingencies and commit to closing. If the buyer backs out of a deal after contingencies are removed, they can lose their deposit. In extreme cases, the seller might sue for additional damages.
10. Final Walk Through within 5 days of close of Escrow
- At this point, countdown begins. If no further action is taken your mortgage shall take place will become active in three days’ time and this is the best time to review everything – documents, inspections, property conditions, and completed repairs, and if there are still remaining issued that the seller failed to address.
11. Sign Closing Documents
- All your loan documents shall be arriving at the title company and will prepare you to sign. Usually, buyers and sellers sign separately. This is the actual legal transfer of the home from the seller to the buyer. Although some of the closing documents may differ from state to state, your realtor will ensure that all the closing documents shall be signed orderly.
- Here are some of the documents you’ll encounter at closing:
o Proof of Homeowners Insurance
o Closing Disclosure
o Loan Application
o Loan Estimate
o Mortgage or Deed of Trust
o Mortgage Note
o Initial Escrow Statement
o Transfer of Tax Declaration
o Certificate of Occupancy
o Title Documents
12. Transfer Water, Garbage, Electricity and any other applicable utilities into your name
- We are in the last steps of your home buying process. Don’t leave transferring utilities to the last minute. This should be set three weeks prior your move in date. Make a list of all your utility companies and contact them to transfer utilities, let them know of the move in date and schedule to have service at your new place stated either on your move in date or a day prior. Also, get information on your current utility balances, and before you leave your old place, check the meters and once everything has been settled, treat yourself and you’re almost there.
13. Become HOMEOWNERS!
- You did it! You are a proud homeowner!
Home Buying Process can somehow be daunting but in the end it is all worth it. You will be purchasing your dream home.
If ever you need a well-versed realtor to discuss and sit this process through, contact me and I will be with you every step of the way.
*This blog simply provides information and is not advising you of what contingencies you should or should not include in your offer.
Discuss your options with your Realtor and/or attorney.