The steps to buying a home can be quite confusing. What I hope to do in this post is help those of you who are First Time Homebuyers understand the process and provide future assistance should you decide to press forward with your home purchase.
1. The first part of the process is to reach the decision that you are committed to buying a new home.
You may currently be renting a home or apartment and would like to take advantage of the current housing market by purchasing a home now while home prices are down and rates are reasonable. In some cases, it's possible that your current rent payment might be equal to that of a home payment. Various home programs are available to help 1st time homebuyers with downpayment assistance and or, financing.
2. Select the right Agent for you.
Buying a home is probably the largest most expensive asset that you will ever purchase. A good agent will listen to your needs & desires, help you understand the process, help you locate financing, negotiate the terms, order the necessary inspections, follow through on the paperwork and ensure settlement will occur on time, be with you during the walk through, attend settlement with you, and remain in contact with you after the transaction.
Your Agent should be courteous, helpful, knowledgeable, and familiar with programs that can help you buy a home. Interview several agents and find one that is competent and committed to helping you get what you want in the time that you want.
3. Determining how much you can comfortably afford.
Your real estate Agent may suggest or recommend that you contact a Lender in order to get "pre-qualified" or "pre-approved". Let me briefly explain the difference in simple terms. Pre-qualified means that you have spoken to a Lender and he or she has run the preliminary numbers based upon your income and outstanding debts. Assuming that you have an average FICO score, he or she will tell you about what you would qualify for, the interest rate of the loan, loan amount, etc. Pre-Approved means that they have essentially completed the pre-qualification and have pulled your credit to validate that under today's current condition you can afford to purchase a home up to a specified value. You want to make sure that you do not buy anything else on credit or fall behind in any of your current debt payments or else this may severly impact your final loan approval. Example: You decide to go out and purchase a new living room set for your new home. The living room set costs $2700. Since you are saving your money for your downpayment on your new home, you agree to purchase the furniture on credit from Zippy's Discount Furniture Store. Zippy's approves you for a line of credit for $5,000. This new account information becomes part of your credit report. Ok, flash forward...a week before closing your loan officer calls you up and says that you no longer qualify for that home because there has been some changes to your credit report. You will either have to pay off that debt BEFORE they will issue you the loan on that new home or, you will be required to write a letter explaining the change in your credit report. Trust me, the last thing you want to do is jeopardize your new home loan! My simple suggestion is that you wait until after you are in the new home before you acquire any more debt and even then you should be frugal and adhere to your monthly budget.
4. Select your new home.
Your real estate Agent will be working with you. He or she may be sending you listings to review or in the process of showing you properties. It is important that you find a home that meets your needs today, tommorrow, and in the future. Obviously, if you are expecting to start a family you will want a home that offers additional living space. So, look for a home that will allow you that additional living space today while keeping within your budget.
5. Writing up the Offer to Purchase.
Now that you have found a home that you would like to buy, your real estate agent will sit down with you and go over the Regional Sales Contract. This is the offer to purchase. This legally binding document outlines the terms and conditions that you agree to purchase the home for from the Seller. You will be expected to produce a Earnest Money Deposit. The earnest money deposit can be in the form of a personal check or cashiers check. The earnest money deposit shows the Seller that you are truly interested in purchasing the property and have made the committment in good faith. Once you have signed the Regional Sales Contract your agent will forward this document to the Listing Agent who has the listing. The Listing Agent will in turn put that document in the hands of the Seller for approval. If the Seller likes the terms and conditions thereof they may accept the contract as it is. If on the other hand they are not comfortable with the terms, they may counter-offer. The counter-offer indicates which terms they are not in agreement with. It will be up to you as the Buyer to either accept these terms as they are or, through your Agent continue to negotiate. Once all of the terms and conditions are agreed upon between all parties, the Regional Sales Contract becomes ratified.
6. The Virginia Jurisdictional Addendum.
In addition to the Regional Sales Contract, you will have been asked to also fill out and sign a Virginia Jursidictional Addendum. This document covers issues like; where you would like important documents related to this transaction be mailed to you at, Virginia Residential Property Disclosure Act, well & septic system terms, lead paint disclosure, Property Owners Association Act, Virginia Condominium Act, The Consumer Real Estate Settlement Protection Act (which allows you to select the attorney who will conduct the settlement for you on your behalf), and Notice of Possible Filing of Mechanic's Lien.
7. Contract contingencies.
Typical contract contingencies include but are not limited to; a home inspection, financing, and whatever else you or the Seller may have requested.
8. Mortgage Application and Approval.
This is the part where your Lender will pull a copy of your credit report to once again check your credit information. The Lender will also order a home appraisal on the property you are buying. Everything checks out ok, your home loan has been approved!
9. Hazard Insurance.
You will have to contact and secure home insurance on your new home. Your Lender will require a copy of the policy showing coverage.
10. Termite Inspection.
At this point your real estate agent may have already ordered or will order a licensed and bonded termite inspection company to inspect your new home.
11. Contact and activate new utilities.
Here is the point in time where you will want to contact the following companies and let them know that you will be requiring new service at your new home address effective on such-and-such a date; the electric company, water & sewer company, natural gas company, phone service provider, Internet/Cable provider, etc.
12. Final walk-through inspection.
This is the time when you should verify that all of the lights, appliances, central a/c, heating system, etc. are operational. If you notice anything that is not reasonable or to your liking - tell your Agent. Your Agent will then have you sign a walk-through inspection report. This report will be brought up at settlement and may allow you to negotiate a price adjustment by the Seller if something is abhorently wrong.
13. Settlement.
At Settlement, your closing attorney will ask you to review all of the documents related to this transaction and have you sign them indicating your approval. After you have signed your name in triplicate several times, you will receive the keys to your new home. How exciting!
14. Moving.
Congratulations on the purchase of your new home! Now is the time to call up all of your friends and relatives and ask them to give you a hand moving into your new home.
In closing, in this post I've tried to briefly mention several of the steps necessary to purchase a new home. This post represents the most basic of these steps. It is not intended to be representative of every home sale process. Each home purchase can and will be different. They may require additional supporting documents, addendums, third party approval, etc. All the more reason to have a licensed real estate professional represent you.
"Helping You Get What You Want In The Time That You Want"
-Keith
Keith M. Elliott Jr.
PRINCE WILLIAM COUNTY REAL ESTATE EXPERT
Realtor®, e-PRO®, ABR®, SRES®, Commercial Specialist®
RE/MAX Olympic Realty
15100 Washington Street
Haymarket, VA 20169
Office: (703) 530-2955, Ext. 6316
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