The decision to pursue homeownership may be based on many factors: everything from a friend’s decision to purchase a home or a family member’s advice against “throwing your money away on rent” to your bad experience with a landlord or the noisy neighbors sharing your wall. While all of those scenarios (minus peer pressure, of course) may inspire valid arguments for considering the purchase of a home, how do you determine if you’re genuinely ready to join the ranks of homeowners? After all, buying a home is a massive decision and includes multiple, long-term financial and lifestyle obligations. The average person spends around 1/3 of their income on their home. You’ll still need to do the work to make sure your personal finances and holistic life picture are also in alignment before you buy, as well of the work it takes to ensure that your real estate and mortgage decisions are sustainable and smart, over the long-term. A good Buyer’s Agent is invaluable to a Buyer, and can be the difference between a wonderful transaction, and a nightmare.
The Home Buying Process Simplified
For First-time buyers, or those who haven't purchased a home in a long time, the process of buying or selling a home can be a little daunting. Having a general understanding of what to expect can help.
This is an outline of the typical home buying process. Emphasis on process -- because it's not an event , it's a process that can take weeks to months, depending on a lot of variables. We also can emphasize typical, because the process can be different, depending on what type of purchase you have, like whether it's a short sale or foreclosure, and it can differ depending on your type of loan or your contingencies.
The process is broken down into 8 general steps:
1. Pre-approving. Whether you've begun searching online for a home, like 90% of today's buyers do, or whether you've contacted a REALTOR® or not, you're real first step should be to get in touch with a lender and get pre-approved. This way you'll know how much you can afford and you won't waste time looking in the wrong price range. You'll also have that all important pre-approval letter when you do find a home that you want to make an offer on. Otherwise, a seller won't take you seriously.
When looking for a lender, it's really important to get a recommendation. Either from family or friends, or from your REALTOR®. As a REALTOR®, we are interested in the buyer’s satisfaction as much as we can control that. If they are happy with the home buying experience and with our service to them, they are more likely to refer us to their friends and family.
2. Home Search.This is where an experienced buyer's agent comes in handy. Someone who knows the neighborhoods and the values, and someone who knows how to listen and help the buyers hone in on what they really want.
3. Making an Offer. There are several things to consider when you make an offer, not just price, although that is the most important consideration. There is time frame -- it helps to know the seller's motivation. Maybe they need time to find another home themselves, or maybe they've already moved out and would like to settle as soon as possible.
Another issue is closing cost help. Does the buyer need it? Does the seller have enough room to pay it?
And if there are competing offers the buyers have to find ways to make their offer more desirable.
4. Negotiations.Many times the negotiation might go back and forth a time or two before the buyers and sellers come to "a meeting of the minds". That's why your agent should have good negotiating skills. [Not the "beat-you-to-a-bloody-pulp" kind of negotiating, but the "win-win" kind of negotiating.] Both parties have to be a little flexible; the best kind of negotiation is when both the buyers and the sellers come away feeling like they've gotten what is most important to them. There can be several times during the process that require more negotiating.
5. Loan Application.The contract will stipulate a certain number of days to make application, and then a certain number of days for loan approval. Somewhere along the process the lender will order an appraisal to determine the value of the house. A wise buyer will include an appraisal contingency in their offer, so that if there is a problem with the appraisal, ie. too low, the terms can be re-negotiated, or in a worse case scenario, the buyer can back out.
6. Home Inspection.The buyer has a right to a home inspection, as well as other inspections, like radon, and there may be other inspections that the lender will want. After the inspections there are more negotiations that take place as to how to address repairs if any are needed. A home inspection is a good idea, in case any material defects are uncovered; the seller will have to deal with them before settlement.
7. Underwriting.Once the repairs, if any, are done, and all contingencies are met and signed off... then the file goes to underwriting. Once the underwriter gives the OK, then we all go to settlement.
8. Closing.Closing usually takes an hour and lots of papers are signed. Keys are handed over. That's that. The typical process can take between 30 to 45 days from contract to close. If there are difficulties, like with an appraisal, or longer than anticipated repairs, the buyers and sellers can sign an extension.
So, if buyers have a move-in date in mind, its best to start the process 3 or 4 months before that.