Home Buying 101
Basic guidelines for the first time home buyer and the home buying process, simplified- Home Buying 101.
by Tracy Tkac
Making an offer to purchase a house can be intimidating and scary, it’s a big commitment that will require a chunk of your financial resources. It’s also exciting and wonderful! You will be building equity and getting tax breaks for mortgage payments, but importantly , you will have a place of your own to do with what you wish. Most of all, your home will be the place where you will make memories and entertain friends and family. You will make your house into your lovely home. Below are the basic guidelines and the home buying process simplified or Home Buying 101.
Making an offer
Even though it’s early in the buying process, you still must sign a legally binding contract. With your signature, you’re committing to moving ahead with the seller. Keep in mind you can add contingencies to many real estate contracts. For example, most real estate buying offers will be contingent on a property inspection, radon inspection, loan approval, appraisal and sometimes other matters. Such contingencies enable buyers to opt out of the contract if unexpected problems or concerns pop up.
In most states, sellers are legally required to provide buyers with disclosure documents including any know defects, lead based paint information, real tax bills from the current year and the estimated property tax bill for the next year. In addition, sellers must disclose any known issues that might affect the property’s value or habitability. Usually, in a transfer disclosure statement, sellers must answer a series of “yes” or “no” questions about the property, and provide the neighborhood homeowners association/ or condo information. If there have been leaky windows, work done without permits or plans for a major nearby development, the seller must disclose them. You will have the opportunity to view the areas master plan and the will be provided with a list of nearby airports. The disclosures will need to be signed by the purchaser and will become part of the offer to purchase and then after all terms are agreed to, they will be part of the contract.
Most buyers put a certain amount of money down toward the purchase price. The balance will come in the form of a bank loan (usually). But a bank isn’t going to hand over that money without due diligence. An appraisal is the financial institution’s way of making sure the contract price is the right price. So the lender sends out a third-party appraiser, which the buyer pays for, to confirm that the contract price is in line with the neighborhood’s comparable sales. If it’s not, the bank can deny the loan or change the terms.If a property does not appraise, the contract price can be renegotiated or contract voided.
As part of the real estate contract, you have the right to a property inspection One of the most common, is a “specific” property inspection, in which the inspector checks the home from the foundation to the roof and investigates all major systems and components. As the buyer, you should follow along with the inspector to learn more about the property. For example, you’ll want to know about the components (such as the water heater) and have a plan in place for maintenance.
After the property inspection, the inspector may suggest having a specialist come out. This could be a roofer, electrician, HVAC specialist or even an engineer. Listen to the inspector and have any recommended follow-up inspections. Remember: This is your one chance to approve the property from top to bottom. If issues arise, you may be able to negotiate repair or a buyer credit. If something major arises and it’s not what you signed up for, you can void the contract via your inspection contingency.
Loan approval or commitment
In addition to making certain the property appraises at no less than the contract price, the bank will want to fully approve your credit, debt and income history. The bank will also want to approve the property’s preliminary title report to make sure there are no liens recorded against the property that might affect its value. The bank can take up to 45 days to complete its review, which should result in a loan commitment or full loan approval. Once that’s completed to the bank’s satisfaction, you’re guaranteed a loan, and you’re one step closer to closing. How much money do you need?
Before closing, you will do a final walk through in the property to make sure it’s in the condition it is supposed to be in, if you have negotiated for repairs, check the receipts and repairs to make certain they were done correctly. Make sure the seller didn’t remove any fixtures, make modifications or leave behind garbage or debris. Check the plumbing, air or heat and that everything that is supposed to remain at the property is there- this your your last chance to make sure all is as it should be!
Depending on the market, the closing may happen at an attorney’s office or at a title company. In some situations, the buyer and seller don’t ever meet. Each goes in to sign their closing papers separately. In others, the buyers and sellers sign the closing documents together. Regardless of how a closing happens, if you’re a buyer and getting a loan, plan on signing dozens of documents at closing. You’ll need to show photo ID, as your signature will be notarized. Prior to the closing, your lender will work with the settlement attorney and send you a closing disclosure statement to review at least 3 days previous to the settlement. The statement details your final closing costs and the money you need to bring to the closing. The funds can be wired in or paid with a cashier’s check on closing day.
Enjoy your new home
Don’t be afraid to call your realtor and ask questions, for direction or help. She is a great resource for the big and little things that come up when owning your own home.
Evers & Co.