Steps in the Home-Buying Process
So you've decided to buy a house, congratulations! Now what? There are a lot of moving parts in the home-buying process and it can be intimidating. Keep this document handy so you can come back to it as you advance through the steps.
- Get to Know the Market - It's important that you know a good deal when you see it and that when you walk into the perfect place, you know it! Start looking online and get an idea of how much house you can get in the different areas on your list.
- Attend Open Houses - Buying a house will be like your part-time job for a while. Try to set aside some time every weekend to go to a couple of open houses. That will give you a chance to compare what you're seeing online to what the properties look like in real life. You'll also discover some things that are important to you that you may not have considered earlier.
You may meet some agents at open houses who are kind of aggressive. Tell them you are working with a buyer's agent and, in general, once they know you're working with a buyer's agent, they should leave you alone.
- Get Pre-approved - You may have a feel for what you can afford but banks have made a lot of changes so it's best to be sure. The lender may require information that will take time to put together. You'll need a pre-approval letter to submit with an offer so get one early so that when you find the perfect place, you can act quickly. Once you get the letter, give a copy to your real estate agent.
Note: Prequalification and preapproval are not the same. Insist on a prequalification from your lender.
- Find the Perfect Place - Now your hard work has paid off and you've found "The" place. Congratulations, now the fun really begins.
- Submit an Offer - Now we're ready to submit an offer. You do not have to offer the amount that the seller is asking, see 'Negotiate' below.
- Typically, a $1000 check is submitted with the offer. This will be made out to the sellers agency and held in escrow until the closing.
- Remember to ask for anything that is important - whether it be that the washer & dryer remain or that they remove the swing set from the yard.
- It's also usual to request a home inspection and there will be a mortgage contingency if you're not paying cash for the property. Note: Either or both of these contingencies are often waived in a competitive bid situation.
- The offer will most likely NOT be accepted unless it's full price. Again, see 'Negotiate' below. It may not be accepted at all if the seller has received other offers. In this case, you may get a chance to adjust your offer or it may be rejected outright.
- As soon as the offer is accepted and signed by both parties, notify the lender that you have an accepted offer so they can get started with the mortgage.
- Because a lot can go wrong between the accepted offer and the signing of the Purchase & Sale Agreement, it's best to wait until then to schedule anything or incur any unnecessary expense.
- There are several dates on the offer. Make note of these in your calendar. It is important that these date commitments are met or that you request an extension if meeting the date is impossible.
Note: If this is a bank sale or short sale, this procedure is different.
- Negotiate - There are a couple of different places where negotiations can take place.
- The first is by submitting an offer for less than the asking price. The seller will normally submit a counter-offer, then you will submit a counter-offer to them and so on until both parties are satisfied that they got the best deal.
- After the home inspection, it's normal to go back to the seller with any major issues.
- There will be compromises required to get the Purchase & Sale Agreement signed.
- Possibly again after the bank appraisal.
- Home Inspection - Most buyers enlist the services of a licensed Home Inspector.
- This person usually has some building or other relevant experience and can point out potential issues with the home.
- It is not a requirement to hire a home inspector.
- Hiring a home inspector is not a guarantee that nothing will go wrong that wasn't on the inspection report.
- When you go around with the home inspector, remember that he or she is going to be looking at the house in a very critical way. The inspector is looking for problems and is not interested in any of the things that attracted you to the house. The inspector will force you to look at the house in a new way - the honeymoon will be over.
- Bring a notepad and make a list of any items of concern. Discuss them with your agent and decide which need to be addressed by the seller and in what way they should be addressed. Don't expect that the seller will fix everything on the inspection report. No home is perfect.
- By the same token, because they're paid to find problems, Home Inspectors often point out issues that are minor or normal so it's important to keep things in perspective and not be scared off of the house by findings that may be true for any home.
- Purchase & Sale Agreement - The Purchase and Sale agreement is a legally-binding document that spells out the terms under which you will purchase the property.
- When the document is signed, normally a second check for 5% of the purchase price less the initial deposit is written to the sellers agent and held in escrow until the closing.
- If you've not already done so, you should hire an attorney.
- It will make everyone's life much easier if the attorney specializes in real estate.
- If you are getting a mortgage, there must be an attorney involved in the sale.
- It's best if that attorney is hired by you and not the lender, so he or she will be required to serve in your best interest.
- At the time of the signing, you will have equitable title to the property. That means that you can be forced to purchase the property unless there is something in the P&S that gives you the right to back out.
- Make sure that everything you expect to happen prior to the closing is on the P&S. For example, if the seller agreed to clean the furnace, make sure that is spelled out in the P&S. Your attorney will help you with this.
- As soon as the P&S has been signed by both parties, forward it to the bank.
- Hiring an Attorney - In Massachusetts, only an attorney can act as an escrow agent on a real estate sale. That means that if you are getting a mortgage, you will be paying an attorney either way. If you hire an attorney,your attorney can prepare the paperwork the lender requires. In this way, you'll only pay one attorney and he or she will be working in your best interest. If the lender hires the attorney, even though you're paying that person as part of your closing costs, the attorney represents the bank and must keep its needs paramount, even if they are counter to yours.
- Appraisal - The lender will usually schedule the appraisal as soon as it has a copy of the P&S.
- Resist any pressure to pay for an appraisal prior to the signing of the P&S. The appraiser needs the P&S prior to submitting the appraisal to the lender and if something goes wrong at this point, there is no way to get the money back that you spent on the appraisal.
- There is always a chance that the appraisal will not come back as high as the price of the accepted offer. Appraisal rules have become very strict and sometimes it is hard to find comparable properties. If this should happen, there are options available that your agent will discuss with you.
- Mortgage Stuff - The lender will be very busy during this time, both justifying the decision to give you lots of money and making sure that the property is a good investment. The lender will also keep you busy justifying deposits and withdrawals and asking to see almost every piece of paper in your desk.
- It's your responsibility to keep things moving, both by giving the lender any requested paperwork and by being the "squeaky wheel" and making sure that things are getting done in a timely fashion.
- Keep track of the commitment date that was put on the offer. If you get an idea from the lender that it will not be able to make that date, you'll need to request an extension as soon as possible. Your agent should also be tracking dates and taking care of things in the background but you can't be too diligent.
- Commitment - The lender will give you a letter once the Processing Department has reviewed all of the required paperwork. This letter is the mortgage commitment letter. It states what is still required to grant the mortgage and confirms that the mortgage will be granted if all of the conditions are met. Forward this letter to your attorney and real estate agent. This is usually the final contingency. Usually at this point, the lender's underwriting department has not yet reviewed the file. This means there is still a possibility for hiccups in the mortgage. You may not know about them until the last minute but know that these things do happen and that they can be worked out.
- Walk-through - At some point, the lender will have completed everything, the underwriter will approve everything and you will be given a "Clear-to-Close". This means that the closing can be scheduled in the next few days and that the loan will be funded. Once you get the Clear-to-Close, schedule a final walk-through of the property with your agent. The house will be empty and it's your opportunity to make sure that everything has been done that was agreed in the P&S and that nothing was left behind or damaged in the move-out.
- Closing - Finally closing day is here.
- You should have received a final balance of money that you'll need to bring to the closing.
- This must be in clear funds so usually a bank check or wire transfer.
- Three days prior to the closing, you're required to sign a document with an estimate of the closing monies. If you think you're closing on Friday, for example, and on Tuesday you haven't received this document, call the lender. There could be a disconnect.
- If any major changes happen after you've signed this document, it will have to be re-signed and another three days have to pass, delaying the closing.
- At the closing, you'll have to sign lots of papers.
- Sometimes the seller is there, as well as the seller's agent, both attorneys, you and your agent. Sometimes the seller will have signed earlier and only your team will attend the closing. Either way is okay.
- Once the documents are signed, the checks will be exchanged.
- If the closing is held at the registry of deeds, the attorney can record the deed immediately and you will be the official owner of record and you'll get the keys
- If it's not held at the registry, you will usually not be able to enter the home until the deed has been recorded. Usually, your agent will get the call that the deed has been recorded and will meet you at the house to hand you the keys and help you celebrate!
Congratulations!
#firsttimehomebuyer #buyahome #howtobuyahouse #christinemccarronrealtor #bostonreguru
Setting Goals for Home Ownership
