As a first time home buyer (or a home buyer buying again for the first time in many years), I'm sure you have many questions involving the home buying process. Where do I start? What costs are associated with buying a home, besides the mortgage? Do you have lenders, home inspectors, etc. that you can recommend? Who pays your fee? If you find yourself asking these questions, read on! This will give you a general idea of what to expect, and will most likely answer most of the questions you may have!
The first step in the process is to contact a Realtor in your area (such as myself) if you're in central Ohio (email@example.com)! As a buyer, enlisting the help of a Realtor is of no cost to you. The seller will always pay the Realtor's fees. There are some extenuating circumstances to this, but 99% of the time, the seller pays me! I basically work for free until the closing! At your first or second meeting with your Realtor, you will be presented with an "agency disclosure" form, which just states who is representing who in the transaction. In compliance with federal laws, this form must be presented to you by your Realtor before you discuss financing in any way. By signing this form, you are acknowledging that you understand who you're being represented by, but does not bind you to this Realtor. Another form that will be presented to you is the "exclusive buyer's agency" form. It is important for you to sign this document. Your Realtor will then know that you're a serious buyer, and will work diligently to find you the perfect house.
The second step you take do is meet with a lender to discuss different financing options, and review your credit. Be aware up front that you will need at least a 3% downpayment, if not 5%, 10% or more. A good place to start is by going to the institution that you have your checking and/or savings accounts with. Ask your friends and family who they've used in the past, and have been satisfied with. Your Realtor can offer suggestions too! You are encouraged to shop around to find the best interest rate, and to find the financing program that will work best for you. If you have your credit pulled for the same purpose multiple times in a 30 day period, your credit will only be "dinged" for it once. Some standard documents that your lender will need from you are bank statements, paystubs & tax returns. Your lender will offer you a variety of financing options, (conventional, FHA, VA, 30 yr. fixed, etc.). After you meet with your lender, you will have an idea of how much you qualify for. This will most likely be more than you're comfortable spending, so just because you qualify for "x" amount doesn't mean you have to spend that amount! Make sure you're including taxes and PMI (if applicable) in your monthly payments! If you can get a pre-approval letter (with a credit pull) from your lender at this point, do so. More and more sellers (especially banks) are requiring you to show "proof of funds" along with any offers, so be as prepared for this as you can be!
Once you know how much you're comfortable spending, I will begin e-mailing you listings that meet your criteria: price, # of bedrooms, # of bathrooms, square footage, neighborhood, basement, garage, school district, etc... Once we actually start looking at homes (usually 5-8 properties per trip) you may decide you don't like certain floorplans or characteristics, (bi-level, split level, ranch, two-story, first floor master, traditional, open), so we'll alter your search criteria accordingly! You may want to drive around neighborhoods you're interested in at different times of the day, as well as on different days (weekday vs. weekend) to get a good feel for the neighborhood. When we find a house you're really interested in, I will send you a list of comps (similar homes in that or a similar neighborhood) that have sold in the past 3 months (up to 6 months if necessary). This will give you an idea of what price you should start with when you begin thinking about submitting an offer. A few other things need to be considered before you submit an offer: do you want to ask the seller to pay for a 1 year home warranty? do you want to ask the seller to pay for a gas line warranty, if applicable? do you want to ask the seller to pay any of your closing costs? how much money will you have for an earnest monies deposit (a deposit held by your Realtor's broker that you will get back at the closing table, but shows the seller that you're serious about purchasing the property, and prevents you from just deciding to walk away from the deal, in which case the deposit would be turned over to the seller). Be prepared for several counter-offers (negotiations between buyer & seller) before all the terms are agree upon. This is very typical, and can take up to a week or longer!
Once you're in contract on a home, I will get the contract to your lender so they can begin their process. Your earnest money deposit will be due as soon as we come to an agreement on all the terms of the contract. We will need to schedule your home & termite inspections right away. It's important to have a home inspection, and for you, as the buyer, to be present for it. The home inspector will show you various things about your house that you may not otherwise know, such as the location of the main water shut-off. I can give you referrals of inspectors that past clients have used and liked. The cost of the home inspection will vary, depending on the age & size of the home, but be prepared to spend at least $275 for this, and will be due the day of the inspection. If you use myself or another Realtor who works for Larry Coolige Realtors, we will pay for your home inspection -- ask me for specific details. A termite inspection is usually around $75, but will vary as well. If at all possible, these should be done at the same time, so we're not troubling the sellers more than necessary! After the inspections are complete, another round of negotiations may begin, which is the "request for remedy" period. If you're not satisfied with the findings from the inspection, you can request that the seller remedy some of the items. This is not generally for cosmetic items, but more for structural/code violations/safety issues, etc. The seller may decide that they will remedy all, remedy some, or remedy none and just reduce the purchase price. The seller will have until 48 hours before closing to have the agreed upon items remedied, unless previously agreed upon otherwise. We will do a final walk-through of the house within 48 hours of the set closing date, which is usually 30-45 days from the date that we actually go into contract. After the home inspection is complete, you will need to pay for an appraisal, which is usually around $400. Your lender will set it up for you, but you will need to be prepared to pay for this at the time it's done.
At this point, you will probably need to get additional documents to your lender, such as proof of homeowner's insurance policy (start checking into this with the company you have your auto insurance with; most will give multi-policy discounts), most recent paystubs, bank statements, etc., but other than that, your part is pretty much done until the closing! 4-5 days prior to your scheduled closing date, you should contact the utility companies that service your new place of residence. Don't have them turned on or switched to your name until the day of closing. Some of the companies will need you present, so make sure you clarify this with them when you're scheduling (there is a thorough list of utility companies along the right hand side of this blog). I will get a HUD-1/settlement statement a day or so before the closing date, which I'll review to make sure everything looks correct, and this will also show the exact amount you'll need to bring to the closing table. The money you bring to the closing table will need to be in the form of a cashiers or certified check.
The last step is the actual closing! You'll want to allow at least an hour for this; sometimes they don't take this long, but you don't want to feel rushed. I will accompany you to the closing, and the seller & their Realtor will most likely be there as well. If you have questions about any of the documents you're being asked to sign, please ask! The representative doing the closing is there for that purpose, and would rather know that you're comfortable with the docs that you're signing. In most situations, you will get possession at closing, which means you'll get the keys/garage door openers/etc. at the closing, and as soon as everything is signed, it's yours! Congratulations, you're now a proud new homeowner!
Happy house hunting!