by Kim Climer
Are you considering buying a home? For the first time home buyer, the entire process can be a bit overwhelming.
Pre-approval/Pre-Qualify. There is a difference between being pre-approved and credit approved. A pre-approval simply means the lender has taken credit information from you and has determined, based on your credit score, that you can qualify for a loan. A full credit approval, or underwritten approval means that you have been completely qualified and can act like cash when making an offer. The Seller can be confident that they will make it to the closing table since there is no fear of financing fall through. Many loan officer can get you credit approved within 2 weeks. Once you have been approved for a loan, it's just a matter of finding you a home and making an offer. Click
here to read more about the credit approval process.
Make an offer. Understand that in this particular market, most homes are sold within the first week of being listed. And many have multiple offers. It's important to make a good solid offer. Now is not the time to try and low-ball the seller. Chances are the seller has two other offers and won't even give yours a second thought. In your offer, will be given an
option period. You must pay for this option period (usually $100), and it will give you time (usually 7 days) to get an inspection and negotiate repairs. If during that option period, you decide you do not want to buy the house, or the seller won't repair something that is non-negotiable to you, you can back out of the contract and receive your earnest money. The only thing you lose is the option money. After the option period ends, you are in contract and cannot back out for just any reason without risking your earnest money. And speaking of
Earnest money, earnest money is paid up front and will be used toward your closing costs. The amount of earnest money can be a great negotiating tool because the amount offered shows the buyer how confident you are that the transaction will make it to closing.
Negotiate the Offer. Many times you will receive a counter offer from the seller. Your agent will present the counter and it will be up to you to determine if you want to accept it or not. If you choose not to, then you are not in contract and there is no need to the pay option fee or earnest money and you go back to house hunting. You can also choose to counter the counter offer. If you decided to accept it, then you are now in contract and you will need to provide two checks to your agent. The option check will be made out to the seller and must be delivered to them or their agent within 2 days. If not, then you do not have an option period! The earnest money is made out to the title company and must be delivered within two business days.
Escrow is then opened at the title company. The buyer gets to choose the Title Company. Your agent can suggest a title company unless you have worked with one in the past and have a preference. The title company will make sure all documents are completed, conduct a title search and obtain title insurance. Loan documents will be given to the title company and they will be the ones who write checks.
Inspection. Like I said before, you have an option period for inspections. An inspector will need to be paid up front and can cost about $350. Your inspector will most likely find issues and it's up to you to decide what you want repaired. There are repairs that your lender will require, such as roof and foundation, but anything beyond that is completely negotiable. This is where counter and counter-counter offers often occur.
Financing. Unless you were credit approved prior to making an offer, the next step will be obtaining financing. Your lender will also qualify the home. They will order an appraisal of the property. If the appraiser finds any issues that were missed by the inspector, he will ask for them to be repaired before the loan is approved. This is an out for the seller because they don't have to do the repair if it's something they may not be able to afford, such as a foundation repair or a new roof. Another to thing to remember, just because you have been approved for a loan, doesn't mean you will make it to funding. This is not the time to go out an buy new furniture or a new car or even get a credit card with out talking to your lender first! Too many deals have fell through because buyers didn't listen to their lender and agents.
Home warranty and Homeowners Insurance. You will be asked to choose a home warranty company. This is typically paid for by the seller. You will also be asked to obtain home owners insurance. Many times your agent has recommendations for both of these.
Final Walk through. The day before closing, you will have the opportunity to do a final walk through of the house. This is so you can make certain that all repairs agreed upon have been completed.
Closing. This is the day everyone has been looking forward to! Your closer will tell you when and where to meet and what to bring with you. Most of the time you will need to bring a certified check for closing costs and down payment. You will need to bring your insurance binder, unless it has already been delivered to the title company. You will also need photo I.D.s and social security numbers.
Funding. Once all documents have been signed, your lender will then conduct a post-closing audit. As long as nothing has changed in your credit, funds will be released and you will be able to take possession of your new home!
Not every home buying experience is like this, but hopefully this helps you to get an idea as to what to expect once you decided to purchase your new home.
Click
here to learn more about who represents you in the home buying process.
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