If you are a First Time Home Buyer, or if it’s just been a while since you purchased a home, we hope you will find this article informative and useful. Here we explain the steps in the home buying process with the goal of preparing you to make intelligent and informed decisions.
If you have any questions about the home buying process, we’re only a phone call or email away!
1. Determine what kind of home is right for you.
Before thinking about which houses to view, think about your lifestyle, your current and anticipated housing needs, and your budget. It’s a good idea to create a prioritized list of features you want in your next home. Finding the right house involves striking a balance between your “must-haves” and your “nice-to-haves.”
To start, consider your lifestyle. If you love to cook, you’ll want a well-equipped kitchen. If you’re into gardening, you’ll want a yard. If you need an office at home, you may want a room for a separate library or work space. If you have several cars, you may require a larger garage. Use this list as your search guide.
Next, think about what you might need in the future. As you consider your housing needs, it’s important to consider how long you may live in your home. If you’re newly married, you might not be concerned with a school district right now, but you could be in a few years. If you have aging parents, you may want to look at homes that offer living arrangements for them as well as you.
It’s important to think about your new home’s location just as carefully as you do about its features. In addition to considering the distance to work, you need to evaluate the availability of shopping, police and fire protection, medical facilities, school and day-care, traffic and parking, and recreational facilities.
Perhaps the most important decision is deciding on the type of home you want. Do you want a condominium, a town house or a detached single-family home? Do you prefer a new home or an older one?
Through all of this, make sure to talk to your CENTURY 21 Property Advisors professional about where you want to live. While buyers generally will use the Internet to browse for homes, it is a good idea to enlist an agent early on to help you with the planning stages. Your CENTURY 21 Property Advisors professional will be available to analyze data, answer questions, and share their professional expertise.
Your advisor has the expertise to help you narrow down your choices by sharing market trends and local information.
2. Determine how much you can spend for a home.
Now that you’ve created your ‘must have’ and ‘nice to have’ list, the next step is determining what you can afford.
Early on in the process, and prior to viewing any homes, you’ll want to get pre-qualified for a mortgage loan. A pre-qualification tells you the amount you’ll be able to finance and what your monthly payment will be. When you find a home to buy, a pre-approval also reassures the seller that you have the financial means to purchase his or her home.
The price you can afford to pay for a home will depend on several factors, such as:
- gross income
- the funds you have available for the down payment, closing costs and cash reserves required by the lender
- your debt
- your credit history
- the type of mortgage you select
- current interest rates
A calculation lenders use to evaluate how much you can afford is the housing expense-to-income ratio. It is determined by calculating your projected monthly housing expense, which consists of the principal and interest payment on your new home loan, property taxes and hazard insurance (also known as PITI), and then determining what percent that total expense is of your gross income.
Your CENTURY 21 Property Advisors professional can assist you with finding the right mortgage professional who will determine the specific loan program that best fits your unique situation.
3. Choose the community and neighborhood.
When you purchase your new home, you will be investing in your community. You’ll spend a significant amount of time and money supporting the schools, community organizations and commercial centers in the surrounding areas. Before you make the final decision, take a good look at the location and make sure it fits your needs.
Evaluate the proximity to other important locations in your life. How long will your commute time be? Is there a hospital or doctor’s office nearby? What about schools, childcare, shopping, family and friends?
Learn about the school district you’ll be moving to. Even if you don’t have children in the school system now, you may some day. The district reputation could positively or negatively impact the selling price of your future home as well.
Drive around the neighborhood at different times of the day and night on multiple days of the week to observe activity/noise levels. Discovering a nuisance next door or noisy road conditions will eliminate unneeded stress from making a hasty decision.
Buying a new home is about more than the structure and property. It’s about your new lifestyle as well.
4. Shop for your new home.
Selecting an agent to help you find your new home is an important first step. A good agent will help you develop your priorities, listen to your concerns, and answer all your questions.
When you’re ready to visit houses, your CENTURY 21 Property Advisors professional will arrange showings of properties that meet your criteria. They will arrange the showings and track the properties you’ve seen.
You should identify the homes that are your favorites, what you like about them, and what you don’t like. This will help you remember each of the homes and their good and not-so-good features.
5. Once you find the right home, make an offer.
Once you’ve made your decision to make a purchase offer, it’s time to get started with the financial and contractual side of the purchase. Let your CENTURY 21 Property Advisors professional guide you through this process. Because you and the seller have different goals, rely on your agent’s experience and expertise. He or she can bring order and calm to the process and will know what questions you may not know to ask to help you reach a favorable outcome.
Multiple offers on the same home are not uncommon, so you may only get one chance to make an offer that the seller will consider. That’s why it’s important to think carefully about your strategy. In most cases it is better to have your agent negotiate the offer. If you have any personal interaction with the homeowner, don’t give out any information about your move, your current housing status, financial status or your feelings about their property – positive or negative. This could hurt you in future negotiations.
How Much Should You Offer?
Ask your CENTURY 21 Property Advisors professional to provide you with a list of what other homes have sold for in the area. Consider how much money you might have to put into repairs or renovations.
Also, it helps to know the features that help or hurt resale. For example, in neighborhoods with two-car, attached garages, a single-car or detached garage may affect the home sale and future value.
In addition to sale prices of other homes, there are several ways you can determine a good price to offer:
- The condition of the house. Is it in move-in condition, in need of paint and other cosmetic improvements, or a fixer-upper that needs some real work?
- The market. If you are in a buyer’s market — where there are more homes for sale than there are people to buy them — prices are probably stable or falling. If you are in a seller’s market — where there are more buyers looking for homes than there are homes for sale — prices are probably moving upward.
- Your ceiling. If you’ve been pre-approved, you know how much you can borrow for your home purchase. Of course, you may not be comfortable paying as much as you’ve been approved to borrow, so think carefully about your financial situation before making an offer.
Next, decide how much you are willing to pay for a home. Remember, the advertised price of a house is a starting point – it may take quite a bit of negotiating to arrive at a final cost.
Buying a Home With Cash
Though most buyers don’t buy a home with all cash, anyone considering such a move may be wondering how. Because all cash buyers sidestep the time-consuming loan qualification process, the deal can close very quickly. The primary advantage of buying a home with all cash is completely avoiding mortgage interest. Buyers also save money that would be spent on loan origination fees, required appraisal, some closing costs and various other charges imposed by the lender.
Talk to your financial advisor. Also, look at how your other investments are performing and determine if spending cash on a home is worthwhile.
6. Prepare for the events from accepted offer to closing.
Home Inspections: Getting a home inspection is a very important part of the purchase of a home. There are many potential problems that can be discovered during this period. These include a leaky roof, termite damage, a foundation problem, and wall cracks, to name a few. These issues happen all the time. The difference between closing on your dream home and starting the process all over again is what occurs during the negotiations between you and the seller. Your CENTURY 21 Property Advisors professional can help make these discussions go more smoothly.
You will also have the option of a walk-through before the closing. This is your last chance to make sure that all of the items that you have agreed upon were completed to your satisfaction.
Homeowner’s Insurance: Protecting your new home with insurance is a must. How well you do that depends on the details of your policy. And while you are not legally required to have homeowners’ insurance, mortgage lenders stipulate that you do. A standard policy will suffice in most instances. It protects against several natural disasters and catastrophic events. The lender may require that you purchase flood or earthquake insurance if the house is in a flood zone or a region susceptible to earthquakes. You also can increase coverage beyond the depreciated value of personal property such as televisions and furniture by purchasing a replacement-cost endorsement.
Closing on your home: The closing is where ownership of the home is officially transferred from the seller to you. The closing is a meeting typically attended by the buyer, the buyer’s agent, and the closing agent. First, the closing agent reviews the settlement sheet with you and answers any questions you have prior to you signing the document. Then the closing agent asks you to sign the other loan documents. Evidence of required insurance and inspections is also presented (if it wasn’t previously given to the lender). After that you submit payment to cover the closing. If the lender will be paying your annual property taxes and homeowners’ insurance for you, a new escrow account (or reserve) is established at this point.
After the meeting, the closing agent officially records the mortgage and deed at your local county clerk’s office or registry of deeds. This legal transfer of the property may take a day or so depending on the time of day the closing takes place and whether the courthouse is open the following day. The closing agent usually will not disburse the funds to everyone who is owed money from the sale (including the seller, real estate professionals, and the lender) until the transaction has been recorded. Once the deed has been recorded, you become the official owner of the home.
7. Move into your new home!
Six to Eight weeks prior to your expected move-in date:
- Purchase or rent moving supplies: tape, markers, scissors, pocketknife, newspaper, blankets, moving pads, plastic storage bins, rope and a hand truck. You will need lots of boxes, and wardrobe boxes for moving clothes.
- Have a garage sale to clear out unwanted items and plan accordingly. Consider donating unwanted items.
- Keep a detailed record of all moving expenses. Your costs may be tax deductible depending on the reasons for your move.
Two weeks prior to the move:
- Hire a reputable mover or rent a moving truck. Be sure to get referrals or references, check with the Better Business Bureau, get estimates, purchase moving insurance.
- Two weeks before moving day, contact your telephone, electric, gas, cable/satellite, refuse and water companies to set a specific date when service will be discontinued. Contact utilities companies in your new town about service start dates, including Internet & long distance telephone services.
- Notify healthcare professionals (doctors, dentists, veterinarians) of your move and ask for referrals and record transfers.
- Register children for school and ask for school records to be transferred.
- Notify lawn service, cleaning and security companies when service should be terminated.
- Advise the post office, publications and correspondents of change of address and date of move.
- Have tools handy for breaking down beds and appliances.
- Move valuables (jewelry, legal documents, family photos & collections) yourself – don’t send them with the moving company.
- Make sure you have a complete Home Inventory of all your possessions.
- Give every room a final once over. Don’t forget to check the basement, yards, attic, garage and closets.
- Have the final payment for the movers and money for a tip
Don’t forget to check in with your advisor. He or she may be able to provide useful local advice, and/or referrals.
Have Questions About Buying?
We’re happy to answer all your questions. Call, email, or stop by one of our offices. We’re here to help!