Stepping Through Home Purchase Maze
It might seem like the process of buying a home is a difficult task with so many confusing parts and paths you feel like a mouse in a maze. It's not so bad, really. Here's what to do.
Step 1. Get Pre-Approved By a Lender
Find a reputable lender. If you have a good relationship with a bank you can start there, but be sure to check with one other two other sources as well, and choose the one you like best. If you have already selected a Realtor (We won't list that as a separate step but it could be the first. In any event having a Realtor working for you as a buyer's agent will help with any or all of these steps along the way.) Getting pre-approved involves filling out some paperwork regarding your income and what you own, and results in your knowing how to set your home-purchase price limit.
Step 2. Search
Begin with the newspaper and whatever local real estate publications may be available in the giveaway racks at supermarkets and shops, to get familiar with the market. Use the Internet. Then, in whatever area you prefer, go to open houses and drive by homes for sale. From ads or from your drive-by's, call and make appointments to see those you like. Not to belabor the Realtor thing (and we'll stop bringing it up) but this is the phase where having one really starts to be an advantage. You'll find the home that is just right, and you will know it immediately whether it's among the first few or after 50 others.
Step 3. Make an Offer
Do your homework before committing yourself to an offer. Research the sale prices of houses in the neighborhood. Your offer has to be fair and reasonable. If it is unreasonably low you take the risk of doing irreparable harm to whatever trust you may need to establish as a fair person, cutting yourself out of the possibility of recovering the deal. Too high, of course, and you will only know in hindsight that you paid too much. You will probably need to pay 1% to 5% of the offer price in "earnest money." In addition to the price, be sure to include the transaction terms that you desire, including such points as being subject to inspection when yo want to close the deal.
Step 4. Seller Acceptance or Negotiation
The seller may accept your offer or may make a counteroffer. It may take a round or a few, but the result is an agreement on terms of the sale.
Step 5. Title Review
Title review may be conducted by an attorney who checks the title and issues an opinion in writing, or in some states a title company and title insurance are involved. In either case the result is, for all practical purposes to you and to the financial institutions involved, an approval to make the transfer.
Step 6. Inspection and Negotiation of Repairs
Hiring a professional home inspection service can be the most important part of the money you will spend to get through the transaction. Revealing a problem such as an unstable foundation, for example, can keep you from making a terribly expensive mistake by allowing you to get out of what would have been an unforeseeable nightmare, or in most cases ensuring that problems are fixed before you buy. For problems discovered in inspection, it will be up to you as to what to accept and what to negotiate for the seller to repair.
Step 7. Appraisal and Loan Commitment
The lender will not finance more than the appraised value of the home, so if the professional appraiser's report comes out lower than the agreed price, the deal could fall through. What then? As the buyer you can make up the difference in cash, or maybe the seller can be convinced to lower the price to the appraised amount. In some cases the parties may try a second appraisal. With a successful resolution and a review of all the documentation, the lender then finalizes the loan.
Step 8. Final Walk-Through Inspection
As the buyer you should take a final look at the condition of the property as early as a few days, or as late as a few hours before closing. Make sure the property is in the agreed condition. This includes completion of all repairs that the seller has agreed to make (and this should be documented with receipts as well as physical inspection), and that no damage has been done to the property.
Step 9. Closing and Possession
Title to the property is transferred to you when you pay the down payment and closing costs. You will be informed prior to the closing appointment just how much money to bring, you and the seller will sign some papers, and you're a homeowner!
Article provided by the Denver real estate specialists, Automated Homefinder.