The Home Buying Process For Your New Home
Congratulations On Deciding To Become A Homeowner!
Buying a home is one of the most significant things you will do in your lifetime.
There are so many things to think about and understand during the process that it can be overwhelming. You don't need to know everything about buying and selling real estate. If you are working with Sandra Mathewson she will be with you every step of the way.
The information here will give you all the basic home buying information you need to know. It walks you through the process of selecting and buying a home, offers tips on how you can simplify the process and get a mortgage, and provides information about the process.
Step One: Is Owning a Home Right For You?
There are many factors to consider when contemplating home ownership. While there are benefits and drawback to owning a home, you have to decide what is best for you. Homeowners experience the freedom of having a place of their own and the benefit of an investment where the equity potentially increases each year.
Home ownership also means you are responsible for all maintenance and repairs. In addition to paying the mortgage every month, there are other expenses to keep in mind: homeowner's insurance, property taxes, condominium fees and utilities. In the event you wish to move, selling a home is more difficult and more time consuming than giving notice to a landlord.
Step Two: Access Your Finances
How much can you afford?
Once you have decided to become a homeowner, you should review your finances and determine how much you can afford per month. Begin by analyzing your current monthly expenses. It may be necessary to cut back on some areas of spending in order to afford a mortgage payment and the other costs of owning a home.
After paying your current monthly expenses (rent, groceries, etc), do you have any money left over?
How much are you willing to spend on housing each month?
How much money can you use as a down payment?
Check Your Credit Report
When applying for a mortgage, a lender will look at how much you can afford to pay and your credit history to determine if you qualify for a loan. Consumers should check their credit report for discrepancies before going to a lender. Obtaining a copy of your credit report is simple for consumers and in some instances the report is free.
The report will detail your credit history, including credit cards, loans and any court judgments or collection notices. When you receive the report, verify that all of the information is correct. If you find a discrepancy, write a letter to the credit bureau to correct the entry.
A mortgage pre-approval is not the same as pre-qualification. A pre-approval means you have completed the application process and have a written commitment from the lender to give you a mortgage loan for a certain amount.
Pre-approval gives you an advantage when dealing with a seller since you already have financing in place. Typically, the home remains under contract while the buyer obtains financing. The seller will be able to complete the transaction sooner to a pre-approved buyer.
Step Three: Find The Home You Want!
What kind of home is right for you?
Everyone's dream home contains different things. While your next door neighbor may want a backyard pool in his dream home, you may want a large yard for the children to play in. Since there are many different ideas of what makes a dream home, you need to decide what features you absolutely must have in your new home.
Homes come in many styles and sizes. There are single family dwellings, duplexes, town homes, apartment like condominiums and cooperative units. Within each home there are many differences, such as the number of bedrooms and bathrooms. Create a list of things you must have for your new home.
Then make a wish list of those amenities you would like to have, but can live without.
What kind of home do you want?
How many bedrooms, bathrooms do you need?
Where do you want to live?
Are schools and shopping conveniently located?
What kind of transportation is available?
Find A Real Estate Agent
In the past, a real estate agent was contracted to assist a homeowner in selling their home. Today, it is common for home buyers to engage a real estate agent to assist them in finding a home. A seller's agent is obligated to the person selling their home and will look out for their interest. A buyer's agent is responsible to you and is obligated to follow your instructions. Real estate agents receive a portion of the sale price as their commission. The commission is typically paid by the seller:
Begin by asking family and friends for a recommendation. Interview several real estate agents before selecting one you feel comfortable with.
Make sure the agent you select is licensed in Colorado and familiar with some of the areas you are considering.
Selecting A Home
Once you have selected a real estate agent to help you in your search, share your home requirements and wish list with your agent. The more you share with your agent about the home you are looking for, your agent will be able to key in on the homes that have what you want.
Your real estate agent will then show you homes that fit your needs. Take your time when viewing a home for sale. It may be helpful for you to take notes and photos indicating what you like and what you don't. You should ask questions about the neighborhood, the quality of the home and what it takes to maintain it.
Once you have found a home you would like to own, work with your real estate agent to prepare a purchase offer for the seller to consider. This offer will often be accompanied by a good faith deposit (earnest money) that will be part of your down payment.
Making An Offer
A purchase offer is a written proposal stating what you are willing to pay for the home, when the closing date will be and any other terms that will be included in the contract the buyer and seller need to agree upon. The offer will also include an expiration date, at which time the offer becomes invalid if the seller has not responded.
If the seller would like to change any portion of your offer, you may receive a written counter-offer detailing their changes to your offer. You are free to accept the counter-offer or make one of your own. The proposal does not become a binding contract until both parties agree to the terms and provide their signatures.
How does title insurance protect you and what are the benefits of title insurance. Read this separate in-depth explanation about Title Insurance.
A professional home inspection should be completed prior to closing. The purchase offer and purchase contract must contain a clause that allows you to renegotiate with the seller or decide not to purchase the home if the professional home inspection reveals serious problems with the home. It is a good idea to be present during the home inspection.
The inspector will conduct a visual survey of the structure and systems of the home from crawl space to roof.
The inspector will provide you with an objective written assessment of the home and any problems discovered. An inspector will also provide you with an estimate for any repairs listed in the report. Your real estate agent or attorney can help you work with the seller to fix the problems, negotiate the repairs or lower the purchase price.
Depending upon the home you choose, other inspections besides the physical above could include:
Septic Certification. If the property you are purchasing contains a septic tank, a system certification by an engineer or septic expert may be required.
Well Testing. Wells should be tested for contaminants and you will be given the results. Consider test findings carefully and contact the county health officers if you have any questions.
Radon Inspection. Radon is a radioactive gas that has been found in homes all over the United States. It comes from the natural breakdown of uranium in soil, rock and water and gets into the air you breathe. EPA recommends that you know what the indoor radon levle is in any home you consider buying.
Termite Inspection. In certain areas, a termite inspection must be completed prior to the closing. The seller generally pays for the property to be inspected for termite damage and other pest problems. A certificate of inspection should be delivered to your lender before the closing. Certain financing programs require a pest inspection such as VA and FHA financing and Colorado bond programs.
The sales contract will include a clause allowing you and your real estate agent to conduct a walk-through inspection of your new home within 3 days prior to the closing. This final inspection gives you the opportunity to see that the seller has moved out and completed all repairs agreed to in the sales contract. Make sure all appliances and systems are working and that any items the seller agreed to leave behind are in the house.