Buying a Home
Buying a home can be one of the most significant investments in your life. Not only are you choosing your dwelling place, you are more than likely investing a large portion of your assets. The more prepared you are the less overwhelming and chaotic the buying process will be. This page will provide you with detailed information to assist you in making an informed and intelligent decision. If you have any questions about the process I am only a phone call or email away.
Step by Step Process Guide
An offer is accepted by the seller and a contract is signed.
A deposit, or earnest money, is paid to an escrow agent.
The signed contract is sent to a closing attorney or title company to begin preparation of all work related to transferring and changing the title to the new owners.
The buyer reviews and signs off on any disclosures. A Seller’s Disclosures form is generally provided by the seller on or before the day the contract is signed . Sellers may see making these disclosures as beneficial to themselves, and believe that buyers will build these pre-disclosed facts into the contract price.
The buyer elects to perform inspections on the property as agreed upon in the contract. These inspections must be completed by a certain date, which is called the inspection contingency date. The types of inspections vary by property type and situation, a home inspector generally inspects the home first.
Additional inspections are:
Wind Mitigation inspection, this will determined the appropriateness of the structure construction in the event of strong winds such as those present in a hurricane. It can also reduce your homeowner insurance policy payments per year.
Four Point Inspection, the inspection and report describes the condition and age of these four elements.
- HVAC (Heating, Ventilation and Air Conditioning)
- Electrical wiring and panels
- Plumbing connections and fixtures
Termite inspection, an examination of the structure to determine the existence of termite infestation.
Beyond a termite inspection, some properties may be covered by a termite bond contract with an extermination company to protect the asset from termite damage on an ongoing basis.
A seller must provide and both buyer and seller must sign a Defective Drywall Disclosure that certifies that the seller has no knowledge of any defective drywall at the time of sale.
Based on the outcome of inspections, buyers may elect to ask the seller for repair work, closing cost credits, or a reduction in the sale price due to flaws that were uncovered.
Sellers have three options:
- agree to all of the buyers's requests
- offer a modified solution back to the buyer
- decline to make any amends
- continue to negotiate
- accept the seller's position
- If within due diligence period, end the transaction and recoup their earnest money without penalty
The buyer may also negotiate for a home warranty that covers major appliances from failure for a time period after the sale, typically a year.
The mortgage process
For those borrowing to purchase their home, the mortgage process is usually the most stressful part of the transaction. It's best to start as early as possible and be ready to produce lots of documentation.
This is the general process:
A buyer submits a loan application to their lender, either directly or through a mortgage broker.
Within 3 days, the lender sends a "Good Faith Estimate," or GFE, to the buyer that is a breakdown of estimated closing costs. The final costs are likely to deviate from this estimate.
The lender renders an approval decision, and if approved, issues a loan commitment letter, stating its willingness to fund the mortgage provided certain conditions are met. These conditions usually include appraisal, so the lender can confirm that the property you're buying isn't worth far less than you're paying. But will also generally include any material change in your situation -or the property- as initially disclosed to your lender.
An appraisal is ordered by the lender or mortgage broker via a central directory of appraisers. Choosing a specific appraiser is not possible, but a mortgage broker can reject an appraiser and ask for a new one. If the appraisal comes in lower than the purchase price, the buyer has until the appraisal contingency date to request a reduction in price from the seller. The seller then has a set period of time to accept or reject the buyer's request. If the seller rejects the request, or that time lapses, the buyer can walk away from the contract without penalty.
Homeowners' insurance is purchased and proof of homeowners' insurance is submitted to the lender.
As you start shopping for a home loan, your first question of each lender will probably be "What's your interest rate? How much are you charging?" Interest rates are usually expressed as an annual percentage of the amount borrowed. If you borrowed $120,000 at 10% interest, you'd owe interest of $12,000 for the first year. With most mortgage plans you'd pay it at the rate of $1,000 a month. You would also send in something each month to reduce the principal debt you owe - and the next month you'd owe a bit less interest.
A final cash figure for what a buyer needs to bring to the closing in the form of a cashier's check is calculated. This is based not only on a mortgage's closing costs but factors like property taxes and utilities paid in to date by the seller.
A final walkthrough will often be performed the day of or before closing to verify the property is in the same condition it was when the process began.
The closing process itself takes place at one table where buyers sign all documents related to their loan and the transaction itself. After all documents are signed and payments exchanged, buyers generally take possession of the keys unless a separate agreement has been reached to allow the seller to stay in the property for a period after closing.
The representative from the title company will record the transaction and deed with the appropriate municipality.
The buyer receives the keys and, unless indicated differently in the contract, officially takes possession of the property.