Important Considerations If You Are Thinking About Buying A Home
If you’re thinking about buying a home, you’re probably feeling a lot of excitement, and you may be feeling a little nervous, too. Rightfully so! Buying a home is a major life experience that looks like a lot of fun on 30-minute TV shows, but here in the real world, it’s a serious undertaking that requires serious thought and lots of preparation.
So, before you start planning the menu for your house warming party or collecting paint swatches and tile samples, take a deep breath and relax. You’ve come to the right place for great information and resources to help you prepare for becoming a homeowner.
As you’re deciding whether to purchase a home, ask yourself one important question: “What’s my why?”
Why do you want to buy a house? Ask yourself the question, and take the time to honestly answer it.
Your why is critical. Your why is your purpose and driving force.
Your why will motivate to you keep going when your lender says pay-down that credit card. Your why makes you smile when a seller says the rusty swing-set conveys with the house. When you know and believe in your why, a shag carpet won’t shake your resolve.
Determine your true purpose for buying a home, and find a knowledgeable Realtor to guide you through the process.
Contact An Experienced Realtor
Working with a professional Realtor from the very start of the process will make your life so much easier and make your experience that much richer. There is far too much paperwork, far too many moving pieces, and far too much of your money on the line to tackle this process alone. Real estate is a full-contact sport and an all-or-nothing profession that requires constant training, education, hard work, and lots of hustle. Realtors who are truly dedicated to their clients are equally dedicated to improving their skills and knowledge of the industry on a regular basis.
Partner with a Realtor who knows the value of open and regular communication with her clients. A returned phone call, a quick text message, or a follow-up email from your Realtor will keep you informed so you never have to wonder what’s happening with your purchase or feel like you’ve been left in the dark. Some agents follow-up with their clients at specific times during a business day, while other agents will take a call during a root canal! No one way is better or worse. You and your agent should establish clear expectations of how you both like to communicate at the outset, and your relationship will be off to a great start!
To learn more about the home buying process, contact Amy to request a free copy of a “Homebuyer’s Guide” today.
How does the buying process work?
Although each real estate transaction is unique, there are several steps in the process of buying a home that will always remain the same. Here’s a quick guide that hits all the key points. Your experience will vary depending on the type of home you choose, the type of financing you use, and the type of sales transaction under which the home is being sold.
- Sign a Buyer Agency Agreement, including required disclosures, with your Realtor, and work with her on the remaining steps throughout the process.
- Discuss your needs, wants, and purpose for purchasing a home with your Realtor.
- Get pre-approved by your lender, and find out how much purchasing power you have.
- Preview homes.
- Make an offer to purchase and negotiate the terms of the contract. When the seller accepts your offer, you are “under contract.”
- Execute all contractual contingencies (financing, inspections, appraisal, etc.).
- Select a title company to facilitate settlement; schedule time and location of settlement.
- Receive condo or HOA documents from the seller. Review these documents.
- Obtain a homeowner’s insurance policy.
- Schedule and execute the final walk-through; make sure all repairs have been completed.
- When documents are requested by your lender/underwriter in the final days before settlement, make sure you submit them immediately.
- Attend settlement. Receive keys from the seller as well as receipts for repairs. After settlement, connect the utilities and move in.
- The title company will record public documents with city, county, and state offices as well as disburse funds to respective parties.
Find Out How Much Home You Can Afford — Get Pre-approved
A pre-approval letter from a lender is your ticket to begin the home search in earnest. In short, it tells you how much home you can afford, and it lets the world know that you have the green light to begin the process of buying a home. Without it, you won’t know how much you’re able to borrow from a bank and sellers won’t take your interest in their home seriously. What’s more, you could spend time searching for one million dollar homes — and falling in deep, deep love with one million dollar homes — only to find out the bank will approve you for a lot less. Talk about a major let down and a major waste of time. For these reasons and more, most Realtors will not show buyers homes without a pre-approval letter in hand.
Be prepared to provide the loan officer or mortgage consultant with all documents that verify your employment history, income, credit history, assets, and debts. Remember, a pre-approval should be complementary, i.e., free of charge. Don’t waste time with a lender who charges a fee for this service.
Documents You’ll Need for Pre-Approval
Current and Previous Addresses for the past 2 years
Current and Previous Employer
Current monthly salary
Bank Account Statements for the past 2 months
Current monthly housing expenses (rent or mortgage payments, utilities, etc.)
Sources and Income Amounts for all Borrowers (include pay stubs for the last 30 days)
Contact information for your Realtor.
What is a standard sale?
Buying a home in a standard sale is probably the most straight-forward and most commonly executed real estate transaction for sellers, buyers, and real estate agents. A standard sale is a two-party transaction involving a seller and a buyer. In a standard sale, a seller usually has equity in the home and is current on the mortgage payments — that means they are also more likely to have the financial ability to keep-up with ongoing maintenance of the home. Most sellers go a step further by painting, de-cluttering, landscaping, and even staging the home to prepare it for market. These homes are usually in good condition and show well to buyers. At the very least, standard sale sellers are looking to break even from the sale, but the vast majority of sellers obviously want to make a profit.
Additionally, in a standard sale, a seller is required by law to provide certain disclosures and addenda about the condition of the property and the utilities as well as supply homeowner’s association and/or condominium association documents to the buyer. A buyer can expect to negotiate with a seller on several terms of the contract including price, repairs, and closing cost credits. However, in a competitive market when multiple offers have been delivered to the seller, buyers are advised to put their best offer forward first — the fewer contingencies, the stronger the offer. Since standard sale sellers are not distressed, so to speak, they have the flexibility to reject a lowball offer and wait for a better one with favorable terms to come along. Depending on the buyer’s financing, a standard sale can go to settlement in as quickly as 30 days or even shorter if the buyer is paying hard cash.
A short sale occurs when a property is sold for an amount significantly less than the homeowner owes the bank for the mortgage. In a short sale, the bank (i.e., the “third party”) agrees to accept the short payoff amount. All short sales require third-party approval. The homeowner must supply the bank with evidence of a financial hardship (loss of a job, divorce, high health care expenses, etc.) that prevents his ability to repay the loan.
Short sales typically take longer to settle than a standard sale because the bank needs time to review the necessary documentation which could include multiple liens with multiple banks or other entities. In a best case scenario, a short sale can be approved in a minimum of 90 days whereas standard sales can settle as quickly as 30 days or less.
For the homeowner, a short sale has a less negative impact on credit scores than a foreclosure because an actual agreement with the lender has occurred and all parties accept the terms. Buyers who purchase a short sale property do so at fair market value — not at a discounted or bargain price. The bank will appraise a short sale property before the sale is approved, and the assessed value is what the house will sell for.
Short sales are purchased on an as-is basis; the seller is typically not permitted by the bank to make repairs. Unfortunately, many short sale properties have been neglected and are in disrepair because of the homeowner’s financial inability to keep up with even routine maintenance. Occasionally, some banks will approve minor repairs that the buyer’s lender requires, and they typically allow for some closing cost assistance to the buyer.
For sellers and buyers alike, when entering into a short sale transaction, remember to be patient, work with a reliable Realtor, and be prompt and responsive to all requests for documents, information, and signatures.
By definition, foreclosure is a process; it is neither an event nor a type of property. A foreclosure occurs when a homeowner no longer has rights to a property because he’s consistently failed to pay the mortgage in a timely fashion. Remember this point: most people we call homeowners are in reality borrowers who may become homeowners once the mortgage is paid-in-full.
Therefore, a mortgage is simply a lien on a house which a borrower gets to live in and enjoy for 30 years while paying off the debt. Until that time, the house belongs to the bank. When a borrower doesn’t pay the mortgage, the bank comes to take it back and sell it in order to recover at least a portion of the debt that the borrower failed to pay.
The Foreclosure Process
Foreclosures can last for months or even years, but they all begin when a borrower stops paying the mortgage. Usually after the third month of missed payments, the bank must, by law, record public notice with the county and give official notice to the borrower of its intent to foreclose.
After receiving this official notice, a borrower enters a pre-foreclosure grace period and offered housing counseling, and the options of a loan modification, repayment plan, or a short sale.
If the borrower declines these options, the process continues, and a date for foreclosure auction is set by the bank. The date is recorded with the county and official notice is delivered to the borrower. Multiple public notices of the auction must be announced in the newspaper. If any of the newspaper announcements are omitted or late, the foreclosure process starts over from the beginning. Additionally, if at any point the borrower’s mortgage is sold to a different bank or servicer, the foreclosure process starts over from the beginning.
Auction of the property can take place at the courthouse, at the property, or even online. The borrower has what’s called the “right of redemption” which means he can, up to the last minute before it’s sold at auction, pay the outstanding debt in cash and redeem the property. Otherwise, the property is sold to the highest bidder who must pay the balance of the mortgage and all delinquent taxes — in cash.