BUYING A HOME
The home purchasing process, step by step.
Buying a home can be an overwhelming process. From financing to negotiating the purchase contract, there are a lot of moving pieces that can leave homebuyers bewildered. A real estate agent can help guide you through each step of the buying process, offering sound advice along the way. By working with a professional agent who knows the ins and outs of the real estate industry, you’ll not only end up with a great home, but you’ll also walk away with a great experience.
Here are some of the key areas that an agent can help you with:
1- Getting pre-approved by a lender
By providing your real estate agent with some basic information about your income, savings, and debt, he or she can assist you in getting pre-approved by a reputable lender. The lender will then go over your financing options, what monthly payment amount you can afford, and what you can expect for down payment requirements and closing costs.
2- Choosing a home
For most buyers, choosing a home is an emotional process. An agent can assist you in this process by offering objective information about each property you look at. From local community information like schools and zoning to home-specific details like condition and amenities, an agent can help you find exactly what you’re looking for.
3- Making an offer
Once you’ve found the home of your dreams, an agent will research recent comparable sales of similar homes in the area to help determine a fair selling price. Based on those comparable sales, as well as other factors like inspections and repairs, an agent will then help you structure an offer and negotiate on your behalf to get the very best deal possible.
THE FINAL LOAN PROCESS IN DETAIL
Once the offer is accepted by the home owner, you are officially under contract; however, in no way it means you’re all done. If buying with financing, a copy of the executed contract needs to be delivered to the lender to further continue processing your mortgage loan to get you to the closing table.
4- Underwriter
An underwriter is the person in charge of analysing credit preceding the granting of a loan. Underwriting typically happens behind the scenes, but is an important aspect of mortgage approvals.
The mortgage underwriting process has 5 key steps: verification, appraisal, title search and insurance, flood certification, and surveying.
5- Underwriting verification
After the housing crisis of the mid-2000s, the Consumer Financial Protection Bureau enacted rules to protect borrowers. Under these new rules, lenders must be sure a borrower is qualified. Verifying the information you put on your application is top priority.
The lender’s team of underwriters will check the information on your application and supporting documents. They will call your employer, for example, to confirm that you work at that job and that you are paid what you said you’re paid. If you’re self-employed, you may need to supply a lot more documentation. The amount of verification involved depends on how risky your lender perceives you to be.
6- Appraisal
The lender wants to be sure that the price of the property you’re buying is comparable to the values of similar properties. The lender will get an independent appraisal of the property prior to closing, and the results could affect the rate and terms of your mortgage. A licensed appraiser will provide an expert’s estimated value based on a physical inspection and comparables, or “comps” — prices paid for comparable properties that have recently sold in the neighborhood. An appraisal typically costs between $300 and $500. And needs to be paid outside closing by the buyer.
7- Title search and title insurance
After the appraiser has looked at the physical side of your house, a title company looks at its legal history. Your lender doesn’t want to lend money against a house that may have claims on it. That’s why a title company performs a title search. The title company will research the history of the property, looking for encumbrances such as mortgages, claims, liens, easement rights, zoning ordinances, pending legal action, unpaid taxes and restrictive covenants.
The title insurer then issues a policy that guarantees the accuracy of the work. Your lender will require a title policy that protects the lender. In some cases two policies are issued — one to protect the lender and one to protect the property owner.
8- Flood certification
Flood insurance is not part of a standard homeowners insurance policy. If your property is in a flood zone, your lender wants to know about it. The lender will hire a specialist to analyze your property and neighboring sites to determine if the home is in a flood zone; the report is called a flood certification. If you’re in a flood zone, you’ll be required to buy flood insurance.
If you think you may be in a flood-prone area, you can check out any property on FloodSmart.gov before you even start searching for your new home.
9- Survey
Finally, some lenders will require that a home’s property boundaries be verified by a professional survey.
While all of this information is being gathered, you can help by taking these steps:
– Provide complete documentation with your application.
– Respond promptly to your lender’s request for more information.
– Call your lender and real estate agent to check on your loan application status.
– Help contact employers and others who may need to provide documentation.
– Keep records of your conversations with your lender.
10- Closing
Closing, or settlement, can be a complicated process. In some areas, the escrow or title company handles the closing process, while in other areas an attorney handles it. Regardless of where you’re buying, a real estate agent can help ensure that everything goes smoothly.