A Lot of emotions are associated with deciding to buy a home. There's excitement, that anxious feeling, Then there's not knowing where to begin. One thing you should keep in mind is searching for a home can be exhausting.
Being informed is always best! I've provided some advice about what you should do before getting started with your home search and the necessary things that occur as you move along in the process.
1. SAVE, SAVE, SAVE - I recommend having at least 5% in savings, of what you expect to buy a home for. There are first time home buyer programs that offer low down payments of between 1%-5%, which is much less than what a traditional down payment would be. (If you are a Military Veteran, you could qualify for 0 down). Also, you'll be ready if there are any unexpected closing costs you have to cover. Your lender and agent will provide you with an estimated closing cost sheet, so you will have an idea of what to expect as well.
2. KNOW YOUR CREDIT SCORE -You will need to have a minimum credit score of 550-650 depending on the mortgage provider. You can check your credit score for free once every year by visiting www.annualcreditscore.com. By law you are entitled to view your credit report for free every 12 months.
3. GET PRE-APPROVED FOR A HOME LOAN (MORTGAGE) -Unless you have the cash to afford the home that you are looking for, you'll need to get pre-approved for a home loan. If you don't have a lender in mind that you want to use, Do a simple search using a phone book or do an online search for lenders near you. Be sure to shop around for the best rates! Also, gather the following documents: The last 2 years of Tax Returns, Bank Statements, W-2's, Pay Stubs, and contact info of Landlords. Having these item will help to move the pre-approval process along.
4. FIND A REALTOR ® -Work with a Realtor who has the knowledge and experience to provide the best assistance to you. Search local Realtors in your area by visiting www.Realtor.com.
5. SEARCH & GO SEE HOMES -After the initial consultation over the phone or in person, Your Realtor will provide you with a list of homes that fit the criteria that you've given them. Of those homes, you will choose the top 3-5 that you would like to see and set a day to go view them all, if possible. If after viewing the homes you selected, you would like to see more before making a decision, Then your realtor will set you up to receive more homes that fit your criteria. You will continue to review homes and schedule a showing with your agent. It's not uncommon for this process to take months, But with patience and diligence you will find the home that will meet your needs.
6. MAKING AN OFFER & NEGOTIATIONS -After you have found the perfect home, Your agent will encourage you to go ahead and make an offer. If you wait too long to make an offer you could miss out on the home.They will also advise you on a recommended starting offer price. Your realtor will give you a professional opinion on a good offer price to start the negotiations. You will also need to provide earnest money in the form of a personal check of at least 1% ($200K Offer = $2,000 Earnest Money Check).Now, the negotiations will begin, there could be some back and forth on the selling price and selling conditions. This is to be expected. Without insulting the seller, your Realtor will work in your best interest and negotiate as much as possible for your money.
7. AN ACCEPTED OFFER -Now, you will need to contact your mortgage provider to begin the financial process and they will also order an appraisal. They will request more documents like proof of homeowner's insurance. As long as the Do this within the first 10 days of the offer being accepted. Also your earnest money will be paid to an escrow agent or Broker. It will not go directly to the seller.
8. INSPECTIONS -Alabama is a Caveat Emptor State, which means buyer beware. In Alabama, Sellers are only required to disclose health hazards. Your agent will recommended that you do your own due diligence and get a home inspection, Don't rely solely on seller's disclosures to guide your decision on whether to move forward with purchasing.
While not required it is highly recommended that you get a home inspection. In Alabama, a Wood Infestation Report is a common requirement by lenders. If the home you are attempting to purchase was built before 1978, your agent will recommend a lead-paint inspection or requesting certification from the seller. Lastly, if the home has a septic tank you your agent will ask you to consider getting a septic inspection.
If your offer is contingent upon the results of any inspections you will want to go ahead an order the inspections. The inspection period is during the 10-days after your offer has been accepted. You should contact a licensed home inspector. You can choose any inspector you want. your agent may also recommend one to you.
If the results of any of the inspections are not satisfactory your agent will communicate your concerns to the seller, you can choose not to move forward, requesting seller to resolve the issue(s) by making repair(s), or ask for the price to be reduced. If the seller chooses to do nothing then you are not obligated to move forward with the purchase.
As the buyer, You can also negotiate with the seller to provide a Home Warranty. This warranty can cover major appliance for a term, Most common for one year.
9. UTILITIES -Setup for the utilities to be transferred to your name at least 1 week from the date of closing. In some cases, this may be taken care of by the seller's agent. Also, remember to schedule for your current service to be disconnected.
10. FINAL WALK THROUGH -Your Realtor will be present for the final walkthrough of the home. This should be performed 1 to 3 days before the closing takes place to make sure the home is still in the same condition. *Just a Tip, Take some colored tape to place near any new damage that needs to be addressed.
11. GET READY FOR THE CLOSING -Make sure that you have a picture id so that the closing attorney can make a copy to register the deed. You'll need your checkbook in case of any incidentals. Remember to bring a certified or cashier's check to cover the amount you will need to bring to closing, if any. Your lender will inform you of this amount. Also, the home owner's insurance certificate, policy, or binder.
12. THE CLOSING APPOINTMENT (SETTLEMENT) -Before the closing date, The signed Purchase and Sale agreement is delivered to the attorney or title company. They begin the work changing over the title and getting the title commitment ready. As far as your mortgage, If all goes well with the results of the appraisal and your financial review, The lender approves you, and issues the loan commitment letter which shows their intent to fund the loan.
A title search will also be done in advance by title company. This is done to uncover any liens that may be attached to the property.
Your closing will take place around a large table, in a private room, located at an attorney's office or a Title company. This is the last step in buying and financing a home, and usually takes around an hour. You will be given an explanation of every document that you will be asked to sign. You will sign the mortgage documents that commits your home as security for the loan, and You will receive copies of everything whether it be paper or electronically. If any money is required for down payment or closing costs, you must have them wired or in the form of a certified /cashier's check.
Once everything is completed, you are handed the keys. Congrats! You are now officially a First Time Home Owner!