Haha! “Simple”! Please know I say that tongue-in-cheek. While buying a home can be a lot of fun and excitement, it can also be challenging. However, I have narrowed down the basic steps to buying a home for you so that you can decide if this something you’d like to consider.
1. Educate Yourself – I strongly recommend talking to a REALTOR and even taking a homebuyer education course as studies show those who do are 33% less likely to default on their loan.
2. Talk to a Mortgage Specialist – Knowing how much you can qualify for and comfortable afford is really the most important step. Be sure to mention you want them to take into account all your expenses—you don’t want to be house-poor. The good ones will do this.
3. Determine What You Want – Don’t just think about the superficial features (i.e. you must have a red-brick home), but really think about you and your family’s lifestyle, goals, needs. For example, do you want a short commute or a large lot? Do you have to have a 4-bedroom home plus a study or can you get by with less home in order to be closer in town or a lesser price? Do you have children who are active in sports? Maybe you need a home that is close to schools and extracurricular activities. Then, you can decide which features in a home you need and which ones you’d like but aren’t necessary. Superficial features can be changed/altered/updated/removed. Location cannot.
4. Look! – Your realtor will be able to use the information you provide to set up a search for you that directly matches your criteria, saving you precious time. I say use a realtor because a lot of those other home sites do not update their list regularly, nor do they have all available homes. Your realtor will pull directly from the Multiple Listing Service (MLS) which is used by realtors statewide to sell a home. Once you know which homes you like, s/he will set up homes to tour. Talk frankly about the pros/cons of each. Make a list; compare homes in order to narrow down your options. Maybe even take a second look at your top three choices.
5. Get Pre-Approved – Once you know what you qualify for, and find the home you want, ask for a pre-approval letter. In Austin, this is pretty much a necessity. It tells the seller that the lender, based on what s/he’s seen so far, thinks you’ll qualify for your loan, giving the seller some confidence the deal will go through.
6. Make an Offer! – This is the big one. Once you’ve found “the” home, your realtor will write up a contract offer which includes the purchase price, closing date, terms and conditions, as well as option money/period and earnest money amounts. Earnest money (usually 1% of the purchase price) is money put up front that shows buyer’s good faith; this will go towards your purchase price. This should be delivered to the Title Company who will hold the money until closing or until a contract is terminated. Option money (usually $100-$200) allows you a set time (usually 5-10 days) to have the home inspected and negotiate any repairs or the purchase price. If during the week you decide you don’t want the home, you receive your earnest money back, but the option money stays with the seller for their time they took the home off the market. If you decide to buy, that money can also go towards the purchase price. In Texas, this money is delivered to the seller. Once all the terms and conditions have been approved by both sides and signed, you will have a written and executed contract.
7. Inspect the Home – Using a reputable inspector, during option period have the home inspected and go through the report with your realtor. This will alert you to any major issues with the home. You can actually attend any or all of the inspection if you’d like.
8. Have Lender and Title Company Finish – Your mortgage specialist will order an appraisal to make sure the home is worth what you’re asking for in the loan, and finish all necessary steps to getting you approved for the loan and on your way to owning a home. Title company will order tax certificate, survey, etc. and hold all monies until closing. (This is in Texas; in some states they use a lawyer instead of Title Company).
9. Order Home Insurance - This protects you against “acts of God” (hazards and liabilities). The one thing NOT covered in Texas as an “act of God” is flood. In order to have your home covered for floods, you’ll have to get special flood insurance. You’ll want to make sure you’re not in a flood plain.
10. Close! – At least 24 hours before closing you should schedule a final walk-through to make sure everything is as it should be. By now everything has been ordered and approved, and you’ve reached the closing day. A closing disclosure will be sent to you three days before closing for your review. This will tell you where all the money is going on both sides. If there are any questions or issues, you can contact your mortgage specialist, title company or realtor. Each party will schedule a time to go in and sign all the paperwork. The Title agent will go through each paper and tell you what each is. Please know that the title companies do this all day, 5 days a week, week in and week out; it’s their job to catch anything not right. Sometimes they go very fast; you are welcome to read each paper or ask any questions that may arise. Once everything is signed, you’ll get a copy, and a set goes to the mortgage lender for final approval. Once all is approved, Title company will release funds, called funding. At this point, money goes where it’s supposed to and you’ll get your keys--Hoorah! You’re a homeowner!! Go out and celebrate! : )
If you’d like more information, or clarification, I’m always here to help. Text, call or email me and I can either send you information or we can meet over a cup of coffee. I love to chat!