Buying Your New Home

Congratulations!

This decision is an important step towards a rewarding and exciting milestone in your life.  Homeownership is not always easy, but most people will agree that the rewards far outweigh the challenges.  Whether you are a first-time, Lifestyle-adjusting, or investment minded home buyer, there’s information you need to know and there are steps you need to take to get the best possible home at the most affordable price and terms.

Step 1 – Hiring the Right Real Estate Agent

If this is your first time buying a house, you really should have professional help. This means hiring a real estate agent who is familiar with the area where you want to buy.

Your agent can help you with many aspects of the buying process -- house hunting, paperwork, market research, making the offer, negotiations and more.

Most importantly, they can help you avoid some of the costly mistakes that first-time buyers often make. A veteran agent will know how to buy a house the right way, and you can't put a price tag on this kind of experience.

Bear in mind that all agents are not created equally. It's like any other profession in that regard -- there are some good ones, and some bad ones. The best way to find a competent professional is by getting a referral from a friend or family member. But you can also learn a lot about agents in your area by checking them out online (especially if they publish a real estate blog with frequent updates).

Step 2- Create Your Housing Profile

Continuing our lesson on how to buy a house, we need to talk about your housing profile. How much are you willing to spend for a house? How many bedrooms and bathrooms do you need? Which neighborhoods are you considering? How many square feet do you need.  Master bedroom upstairs or down?

What about lot size? How close will you be to work, school and shopping? What things can you live without, and what do you truly need?

These are questions you should be asking yourself, long before you start house hunting. This is your "housing profile," and it will help you limit your search to those properties that best meet your needs. You can save yourself (and your agent) a lot of time by putting these items on paper.

If you can give your agent a document that specifies exactly what you're looking for, he or she will have an easier time finding it. This step also forces you to ask a lot of tough but important questions -- questions that need to be answered before you can start house hunting.

Step 3 – Preparing your finances to buy.

When you apply for a mortgage, you will need to furnish information regarding your income, expenses and obligations.  To save time, have the following items available for each borrower.

• Two most recent pay stubs
• W-2s for the last two years
• Federal tax returns for the last two years
• Last two months’ bank statements
• Long-term debt information (credit cards, Child support, auto loans, installment debt, ect.)

The lender will also need to check your credit report to study your financial history and credit score to determine what loan you may qualify for.  Make sure you pay your bills on time and in full.

Step 4 - Get Pre-approved for a Mortgage Loan

Pre-approval is when a mortgage lender reviews your financial situation and tells you how much they are willing to lend you. Lenders make the decision to grant a loan based on avoiding as much risk as possible in their investment, as well as on guidelines to ensure loans can be resold on the secondary market.  The amount of your loan will be determined by four basic criteria:  income, assets, debts, and the interest rate that you can lock in.

Getting Pre-approved helps you in several ways. First, it can help you identify any problems that might prevent you from getting a loan (bad credit, insufficient income, too much debt, etc.). Sellers will also take you more seriously, since you've already been reviewed and pre-approved by a lender. Pre-approval does not guarantee you'll actually get the loan. But it's a good sign.

Step 5 - Shop for the Right Home

This is when you start scouring the Internet and driving through neighborhoods to find a home that meets your needs. But, as with everything else in real estate, there's a right and wrong way to go about it.

The best way to save time and energy is to view properties online first. That way, you can rule out the ones that don't meet your needs -- the houses that are too small, too expensive, too far away, etc.  Your agent will be able to create an online account that will notify you when homes that meet your criteria go up for sale.

This will ensure that you are constantly aware of new listings in your area.

Step 5 – Making Your Offer

So you've found a house that meets your needs, and you're ready to buy it. What's next? The next step is to make an offer to purchase the home. But how much do you offer and what should you do if the seller rejects or counters your original offer?

This is a critical stage in the buying process. Get it right, and you're on your way to homeownership. Get it wrong, and the house of your dreams could slip through your fingers. We have collected some expert advice below, to help you succeed.

Here's the most important lesson to take away from this section: It's called an "asking price" for a reason. It's what the seller is asking for, but it's not necessarily what they'll get.

In reality, the market sets the value of a house -- not the homeowner. But this doesn't stop many sellers from overpricing their homes. In fact, the majority of newly listed properties are overpriced.

As a home buyer, you need to evaluate the asking price based on recent sales data. Your agent will pull up data for recent and comparable sales in the area (these are referred to as comps). Using this information, you can better determine if the house is worth what the seller is asking.

Step 7 – Purchase Process

After the offer is accepted, there are various steps that need to take place before you can close.  These include the loan application, qualification and commitment, all inspections completed and repairs are made. 

Real Estate Agents handle the steps that need to be taken during the purchase process.  In California certain disclosure laws must be complied with by the seller, and the real estate agent will ensure that this takes place.

Step 8 - Get the Property Inspected

No home is perfect, even newly constructed homes, and that’s why you have the opportunity to examine what you’re buying before you go deeper into the obligations of the contract.  What you want to know about are the defects of the home.  The best way to do this is with a professional home inspection.

The purpose of a home inspection is to give you as much information about the condition of the property as possible.  Your home inspection should cover the structural elements of the house, roof, foundation, gutters, appliances, electrical and plumbing systems.  The home should be conveyed to you in good working order.  If you are planning to occupy the home immediately, a home inspection is highly recommended.

Step 9 - Close the Deal

When you've made it through all of the steps above, you're on the home stretch … right? Almost. There's still one very important process to get through, and that's the real estate closing (also referred to as settlement).

This is when all of the paperwork is signed, all monies are paid out, and the keys are handed over from the seller to the buyer. In other words, this is where you officially become a homeowner!

Leading up to this step, the best thing you can do is stay in touch with your agent, your lender, and your escrow agent. Most of the snags that occur at closing are the result of poor communication. This person did not talk to that person, so there was some kind of surprise on closing day. So keep in touch with all parties involved. Make sure the escrow person has all the paperwork he or she needs to close the deal. Be proactive about keeping the process on track.

You should also refer back to step #3 above. Remember, it's important to start saving money early on, so you'll have enough to cover your closing costs. You'll get an estimate of these costs shortly after applying for a loan, but you should plan for additional "surprise" expenses along the way. The articles below will help you plan accordingly.

Step 10 – Planning a Stress-Free Move

Moving ranks as one of the most stressful events in anyone's life.  Not only is the planning and preparation time-consuming and labor-intensive, but moving also takes an emotional toll on family members and even on pets.

There are many strategies you can follow to make moving as pleasant as possible for your family, the most important of which is to get started early, particularly if you are moving at a high-volume time like summer.  Do a little each day, even if it’s only to pack and mark one box and throw out one garbage bag of junk.

You’ll be surprised how quickly your efforts will add up.

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