Buying a Home

Preparing to Buy

Whether first-time homebuyers or entering the marketplace as repeat buyers, the more you know about the real estate marketplace, the more likely you are to effectively define your goals.

It is advisable that you sell first, and then buy a property. First of all, the property you want will probably not take a contingency offer. Second, if you are emotionally attached to the real estate you want to buy you won't be as objective on selling your home. You may take less than it's worth so that you don't lose the other home. There's nothing wrong with that as long as you understand the financial implications.

Choosing an Agent

Use a real estate specialist who knows the market. A professional real estate specialist should be able to show you the homes that fit your needs.

When relocating to a new area, agents can be particularly valuable resources. In addition to providing local area information regarding schools, day care or elder care services, public transportation, proposed development, and so on, once construction is under way, an agent can periodically stop by the work site, supply you with progress reports, and photograph or videotape phases of the construction.

Financing Your Purchase

Get Loan Preapproval. Meet with a loan officer. Your credit files are to be reviewed and the loan officer should state you can readily qualify for a given loan amount with one or more specific mortgage programs. Based on this information, the lender will provide a preapproval letter, which shows your borrowing power.

The preapproval letter can be shown to listing brokers when bidding on a home. This information is important to owners. It demonstrates your financial strength and shows that you have the ability to go through with a purchase.

To obtain a loan you must complete a written loan application and provide supporting documentation. Specific documents include recent pay stubs, rental checks and tax returns for the past two or three years if you are self-employed.

Mortgage financing can be obtained from mortgage bankers, mortgage brokers, savings and loan associations, mutual savings banks, commercial banks, credit unions, and insurance companies. A growing number of realtors can also arrange financing.

Finding a Home

Consider such things as pricing, location, size, amenities (extras such as a pool or extra-large kitchen) and design (one floor or two, colonial or modern, etc.). Next, it's important to consider your priorities and needs in several years.

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Managing the Offer

In an offer to purchase real estate, you include not only the price you are willing to pay, but other details of the purchase as well. The process of making offers varies from country to country. In a typical situation, you will complete an offer that the realtor will present to the owner and the owner's representative. The owner, in turn, may accept the offer, reject it or make a counter-offer.

Because counter-offers are common (any change in an offer can be considered a "counter-offer"), it's important for buyers to remain in close contact with realtors during the negotiation process so that any proposed changes can be quickly reviewed.

You want to anticipate potential problems so that if something does go wrong, you can cancel the contract without penalty. These are called "contingencies" and you must be sure to include them when you offer to buy a home. When you need a mortgage to buy the home, a condition of your offer should be that you successfully obtain suitable financing. Another condition should be that the property appraises for at least what you agreed to pay for it. During the escrow period you are likely to require certain inspections, and another contingency should be that it pass those inspections.

Before setting upon the price you will offer you need to consider the condition of the property, improvements, the current market, and the circumstances behind the seller's decision to sell. After you have come up with an offer price, the next step is to determine how large a deposit you want to make with your offer.

One recommendation is to make sure your deposit is less than two percent of your offered price. If your deposit is larger than that, the lender will pay particular attention to how you came up with the funds.

Still, you should keep in mind that large deposits do impress sellers, you may also find that by making a large deposit you can convince the seller to accept a lower offer. More money up front may save you money later.

Getting Insurance

Insurance policies and warranties have limitations and individual programs have different levels of coverage, deductibles and costs. For details, speak with realtors, insurance brokers and home builders.

The time to obtain insurance and warranty coverage is at closing, so speak with a realtor or insurance broker prior to closing. Be sure to ask about limitations, costs, deductibles and "endorsements" (additional forms of coverage that may be available).

Closing

The closing process, which is also known as "settlement" or "escrow," is increasingly computerized and automated. In practice, closings bring together a variety of parties who are part of the "transaction" process. At closing, transfer taxes must be paid and other claims must also be settled (including closing costs, legal fees and adjustments). In most transactions, the closing agent also completes the paperwork needed to record the loan.

Before closing, you will want to revisit the property to ensure it is in the condition you have required in your offer, and to inspect that any required repairs have been performed. This right to do a final inspection should be included in your offer to purchase the home.

Also at closing, determine the status of the utilities required by the home, items such as water, sewage, gas, electric and oil service. You want utility bills to be paid in full by owners as of closing and you also want services transferred to your name for billing.

About two weeks after closing, contact your local property records office and confirm that your deed has been officially recorded. Such records are public notices that show your interest in the property.

Moving

Settlement is a brief process where all of the necessary paperwork needed to complete the transaction is signed. Title to the property is transferred from seller to buyer. The buyer receives the keys and the seller receives payment for the home. From the amount credited to the seller, the closing agent subtracts money to pay off the existing mortgage and other transaction costs. Deeds, loan papers, and other documents are prepared, signed and filed with local property record offices.

You may want to make a photo or video record of the home and their possessions for insurance purposes and then keep the records in a safety deposit box. You may also want to maintain fire, theft and liability insurance. As the value of your property increases such coverage should also rise. Your insurance professional will advise you on details.