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The Home Buying Process
Dated: August 9 2015
For first time home buyers-- or anybody who hasn't bought a new home in several years -- the process can be rather intimidating. There is SO much to think about, and combined with an already-busy schedule of work, family, and social life -- it is easy to see why people are easily overwhelmed! Fear not - I am here to tell you all the main steps to buying a home.
1. The first, and arguably most important step, is to hire an agent! Because the process can be intimidating, you want to make sure that an experienced, educated professional is working on your behalf. The best part about hiring an agent? It's FREE! Buyer's agents get paid at closing -- by the OTHER realtor. It doesn't get much better than that - you're getting the benefit of somebody working on your behalf, and not only do you not pay them a penny, they don't get paid until all your needs are met. Talk about motivation! Usually a realtor will ask you to sign a buyer's representation agreement... which doesn't obligate you to buy anything, just states that if you do buy, you'll use the realtors services to do so.
2. Next up is to find a lender, get pre-qualified and pre-approved. This will set a price range for your search, based on credit, income, and debt-to-income ratio. A lender can also help you eliminate any credit dings and tell you how to best improve your standing in order to qualify for your dream home. Then, together you'll decide on what mortgage type (FHA, Conventional, etc) best meets your needs.
3. Look at houses! This is the FUN part - your realtor can set up a custom search for you, which will deliver properties to your inbox as they become available. This assures that you won't miss out on any opportunities in todays hot market.
4. Write a purchase agreement! A purchase agreement is what we call "an offer" on a house. With your realtor, you'll determine the right offer price, seller contributions, down payment, earnest money, and contingencies. Contingencies are things like the sale of your current home, major inspection issues, or losing your financing... all things that would cancel the purchase agreement.
5. Once the counter offers and negotiations are done, and an offer is accepted ("final acceptance"), you'll need to schedule an inspection. If you have an inspector you'd like to use, that's great - but if not, your realtor will be able to recommend a trusted professional to inspect your home. After the inspection, the buyer usually has a few items that the seller needs to address... and the purchase agreement will have set forth the timeframe in which the work has to be completed.
6. At final acceptance, your earnest money check will need to be delivered to the seller's brokerage. Earnest money counts against your down payment at closing, and basically is money that is put forth to tell the seller that you are very interested and aren't going to default on the purchase... basically, it shows you've got some skin in the game! In the Twin Cities Metro Area, standard earnest money is 1-3% of the purchase price.
7. Next up is ordering the title work -- you don't need to do this, your realtor will. Again, if you have a title company you'd like to work with, that's great - if not, your realtor will have a preferred partner.
8. Your lender will order an appraisal on the home, which you'll have to pay for.
9. Work with your lender -- they will ask you for A LOT of information about your finances, and will give you some tips to keep in mind - such as not altering your finances in any way until after the closing.
10. Order homeowners insurance. Most companies will required you to pay the first year up front and have proof of coverage (a binder) at closing.
11. Schedule a final walk-through - typically this happens as close to closing as possible. You'll want to make sure that the home is exactly as you expect it, and nobody ran off with the kitchen sink!
12. Schedule a wire transfer or obtain a certified check - your lender and title company will tell you the amount and any requirements in advance of closing.
13. Sign a lot of papers!
14. Grab your keys and schedule your housewarming party... then drive off to your new Home Sweet Home!
Of course with any major transaction there are things that come up to add to or change the steps above, but those 14 steps are the major ones, and a good realtor will help you through all of them.
I would love to be the realtor to help you find your heart a home!