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December 27, 2018

Nine Steps to Buying Your Home

How to Buy a Home, Nine Critical Steps

Buying a home becomes a more complicated matter each year. As a buyer, you must always keep in mind that there is no substitute for your own due diligence. That is, no one will look out for your best interests as well as you will. Always keep this in mind.

You have heard before, "Invest your time before you invest your money." Good advice and the reason you are here. You must learn about the procedures, the forms, the contracts, the customs, how to work with real estate agents, the language of lending, and much more. Be an informed consumer and never be afraid to ask a question if you don't understand something. Again, there is no substitute for your own due diligence.

Step 1: Select an Agent

You will probably end up working with a real estate agent as real estate brokers sell most homes.

Understand the law of agency. Does the agent represent you or the seller?

Select an agent by interviewing several. Consider asking questions like, how long has he/she been selling real estate. Asking for references is also a great idea.

And when you do select an agent, allow your search to end and only work with one at a time.

Many sellers are very interested in the question, "Who pays the commission?" Always remember that the buyer provides the funds.

Step 2: Pre-Qualify for a Loan

Most lenders will be happy to do this at no charge. Your monthly payment should be about 1/3 of your gross income.

Learn the language of finance, some of the terms you should become familiar with include:

 VA loans

 FHA loans

Fixed Rate

Adjustable Rates

Teaser or Sucker Rate

Margin

Index

Lifetime CAP

Annual CAP

Monthly CAP

Payment CAP

Negative Amortization

Recasting

Assumable

Prepayment Penalty

Points

Loan Origination Fee

Discount Points

Federal Reserve Regulation Z - Truth in Lending

Annual Percentage Rate

Real Estate Settlement and Procedure Act (RESPA)

Step 3: Obtain a copy of the contract you are going to use, read it and understand it. Under key areas such as:

Contingencies

Liquidated Damages

Arbitration Provisions

Inspection Provisions

Earnest Money Deposit

Step 4: Decide what you must have and what you don't absolutely need. Be realistic. Even people who spend millions of dollars in a home rarely end up with exactly what they thought they wanted. Creating a buyer sample list of wants and needs can be helpful to accomplish this.

Step 5: Select a part of town or several parts of town and begin to look at property. You must determine value patterns in your mind and you can only do this by looking at property.

Step 6: Once you have found the home you want, you will submit an offer. In determining the offer price, you should ask your agent for a "Comparative Market Analysis" or CMA.

Be sure to ask for full listing information. Important considerations are:

Who is the agent working for, you or the seller?

How long has the property been on the market?

What is the current average market time?

Have the sellers received any other offers?

What have comparable properties closed recently? (This is your best indicator of market value.)

What have comparable property listings expired? (This is your best indicator of property that is over priced.)

Have your agent prepare an estimate of buyers closing costs.

Step 7: Write the Contract and Present the Offer

When you have determined what you are going to offer, your agent goes to work. Negotiation is an art and the agent earns their money here.

Make sure the contract is contingent on an inspection by a competent building inspector. Don't skimp here. Don't be penny wise and pound foolish on this point!

Step 8: The Escrow or Closing Period

Things can go wrong during this critical period. Understand this. Sometimes people do not communicate. Expect snags and misunderstandings and stand ready to deal with them. Read and understand the escrow or closing documents. If you don't understand something, ask questions.

Stay on top of the transaction and monitor all aspects of its progress at least once a week. Mainly stay in touch with your lender. Ask for sample loan documents before the loan is to be funded and read them carefully.

9. Review and understand the closing statement.

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