First time home buyers are making up the bulk of home sales activity this year because of the incredible deals and low mortgage interest rates. It is a great time to buy! A recent survey by the National Association of Realtors reported that 41% of buyers in 2008 were first time home buyers and that 76% of home buyers purchased their home through a real estate agent. Whether you decide to use a real estate agent to represent you or not, it is important to understand the home buying process and the costs you will incur to make the process smooth and painless.
- Pre-Approval: Contact a mortgage lender or broker and get pre-approved for a loan. In this shifting market, it has never been more important to speak with a lender before searching for a home. This will allow you to understand financing options and requirements, and keep you from being disappointed if you find out you are looking at homes out of your price range. You will also need to ask for a pre-approval letter from the lender to keep in your files. For a list of professional and accommodating mortgage brokers, please visit my website at www.jeanetteandwhitney.com.
- Wants & Needs: Decide what features are important to you in your future home. Make a list of features that are non-negotiable and others that are ideal, but are not a requirement. This could include the number of bedrooms, style of kitchen, lot size, and location. This will allow you to understand your needs and narrow your search down to minimize the time you spend looking.
- Home Search: Contact a real estate agent to set you up on a daily email system where you will only receive listings that meet your specific criteria or use online search engines such as Realtor.com, AJChomefinder.com, trulia.com, and many others to look for homes. Schedule showings on homes that you find appealing. If using an agent, they will do this for you!
- Offer & Negotiations: Once you find a home that you love, it is time to make an offer. Remember that you will need to put down earnest money in order to show the seller that you are truly interested in the property and make the contract binding. The earnest money amount varies, but is typically around 0.5% to 1% of the purchase price. So, for a $150,000 home, you could put down anywhere from $750 to $1,500 as earnest money. Then it is time to negotiate the contract including purchase price, seller's contribution towards closing costs, closing date, due diligence period, special stipulations, financing and appraisal contingencies, and other negotiable factors. An agent can help you to navigate through the purchase agreement and look out for your best interests.
- Inspections: Once the contract is binding, you will want to have an inspection done on the property to inform you of any potential issues with the home. If you decide to purchase a foreclosure or short sale, these homes are typically sold "as-is," which means that the bank or seller is typically not going to make repairs, but you still have the right to the inspection. You should use a certified home inspector and this will cost you around $300-400. You may also want to consider having other types of inspections done as well, such as radon testing, termite inspection, survey, septic tank, and well inspections. Any inspection you perform will be upfront out of pocket expenses for the buyer. Once the inspection report is completed, you will want to negotiate items that you want repaired before closing. Once all parties agree, you now move towards closing.
- Closing: You will want to set up the closing with a closing attorney. The attorney will run the title search to find out if there are any liens or restrictions on the property so there are no surprises at the closing table. The closing attorney and the lender will need a complete copy of the contract. You will want to constantly stay in touch with your lender and closing attorney and promptly provide any documentation they request. The lender and closing attorney charge fees that you will need to pay at closing, but you can negotiate with the seller to pick up some of these costs. Once closing is complete, you are now officially a homeowner! Congratulations!
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