After you find the real estate agent you are comfortable working with, here are the next steps in buying your first home.
Select a Lender
The point of talking to a lender at this point is to get pre-approved for a loan. While you may think you know what you can afford, talking to a lender will ensure you financial instincts are correct. Second, what if you find your dream home? You will most likely not be able to place a serious offer on it without that letter from the lender. That means you will have to wait to meet with a lender while someone else places and offer on it and it goes under contract (I have seen this happen).
If you are in need of a few recommendations for lenders to speak with, I would be happy to provide them upon request.
2. Starting your Search
There are a lot of different search criteria used in searching for homes. Make sure you take the time up front to discuss what you are looking for in a home with your agent. Where do you want to live? Are school districts important to you? Do you need a bug yard for a pet? What are your “must haves”? Your agent will what he or she learns to put together a MLS search that will be emailed to you. There will most likely be a lot of properties to search through at first (unless you are looking at very specific homes) and more will be added to this as new listing that match your search criteria come on to the market to the price drops on home that places it within your price range. Once you find a few homes you are interested in, you and your agent will set up some time to go see them. Be sure to bring a notebook and pen in order to write down what you like and didn’t like about each one (they can sometimes blend together if you see enough in a day).
3. The One
Congrats! You found it. Now all you need to do is buy it.
It all starts with writing a offer. If it is a standard contract it will most likely be 8 pages of small print with blank spaces intermittently throughout that allow the agent to enter things like price, closing date, financing information, acceptance deadline, etc. It is important to read through your offer to ensure you understand it completely (if accepted, it is a binding legal agreement that should not be taken lightly). It may be wise to read through a blank contract when you first start working with your real estate agent to familiarize yourself in advance with everything it contains.
Once your offer is completed, your agent will submit it to the agent representing the seller(s). They can agree to the offer and sign it thus creating a contract, counter your offer with another (sometimes a higher price), or reject your offer as it was written. If it was rejected, you could always submit a new contract more in line with what you think they want. Of they counter, you can accept their counter proposal or even counter their proposal with one of your own. If they accept your offer, CONGRATS! you are officially under contract.
Now that you are under contract, you are going to want to have the home professionally inspected (at your expense). The purpose of inspections is to inspect the major systems in the house (HVAC, roof, electrical, plumbing, structural) to discover any serious problems as well as to educate yourself about maintaining this particular home. The building inspection typically costs between $300-$400 and usually takes 2.5-3 hours. Other inspections you may want to consider having performed during this period include termite, sewer lateral video scoping, radon testing, mold testing, and structural engineering. It is important to know that an inspection is NOT a warranty and inspectors are not experts in any one area.
When inspection are completed, you have the right to ask the seller to correct any problems that were discovered. This can be through a direct repair or possibly a credit toward your closing costs. Similar to the original contract, the seller can agree to written request, counter with a new proposal, or reject it. It is important to remember to treat inspections as opportunities to discover any major issues or problems with the property not to renegotiate items that were noticed or were readily apparent during your showing(s) before writing the contract.
Once inspections are finished and both parties are satisfied with any re-negotiations, your lender will most likely order an appraisal of the property (if your purchase is contingent upon financing). This is necessary as the bank wants to ensure you are not buying a crumbling down mansion with the money they are loaning you (since part of the collateral will by the property itself). Typically, the appraisal value will be close to the price that you and the sellers have agreed to. If the appraisal number is lower than the agreed upon sales price, you will only be able to get a loan for up to the appraisal number. When this happens, you can ask the seller to reduce the price, make up the difference out of pocket, you both meet somewhere in the little, or back out of the contract.
6. Loan Approval
Your lender and their underwriting team have been busy scouring through all your records to hopefully come up with a clear loan approval. It is important to respond quickly to all requests from your lender and provide them any and all pertinent information they ask for. Once you are approved for the loan, you should be almost to the finish line.
7. Final Walk Through
You will want to schedule a final walk through of the property a few days before the scheduled closing. The purpose of the walk through is to a) verify the property is in the “same general condition” as it was the day you made the offer, and b) that any agreed-upon repairs were completed and in a workman-like manner.
In order to officially “close” on a property, you will usually spend about a hour signing your name enough times to cause a hand cramp. This can take place at a title company, a realtor’s office, or even your work (additional costs for mobile signing). At the en you will receive a congrats and hopefully a set of keys to your new home (once funding clears). At this point, it is important to not go back to work. You are a new home owner! Go celebrate. There will be plenty of time to work on the weekend when you are moving in and unpacking.