Home Buying 101
I think I am ready to buy a house. What is the process?
First - Get prequalified with a Lender
First thing is to get your finances in order, make sure your credit score is in good shape. If you don't know where you stand, you can request a full copy of your credit report. If you think you are good, its time to talk to a lender to see what type of financing you may qualify for, interest rate, price of home and type of loan. There are several types of loans and your lender can help you understand what types may best suit your situation.
If the lender determines your credit needs some work, they may have a service to assist you in some sort of credit counseling plan to get you on track.
If your credit is good, your lender can provide you with a budget and guidelines for shopping for your new home.
Second - Get hooked up with a realtor in the area you want to buy. It's best to work with a real estate agent that is experienced in your type of purchase and the geographic area. They will know what the locals know and if you need to know where the schools, hospitals, post office and other things are, they can be full of information. They will also know the local market for properties and can help you assess appropriate home values or what is a fair offer.
Third - Go shopping! Between you, the internet and your agents access to the local MLS, you should be able to find a selection of homes to research or visit in person. If you and your realtor discuss what are 'must haves' and 'absolutely nots' she can do some investigating before you even visit the properties and possibly come up with some you may not have seen to add to the list, and eliminate the stinkers.
You and your agent will possibly spend many hours and days researching and touring potential properties. Then, one day, you will find THE ONE! You'll start picturing your furniture and where you'll put what and which room will be little Betty or Bobby's. It's time to make an offer!
Fourth - Making a purchase offer. You and your agent will discuss how much you will offer for the property, how long to ask for inspections, if you need to ask the seller to pay for certain items, what your closing date will be and other line items included on the purchase contract. Part of the process is providing some sort of 'Earnest Money' to attach to the contract. It isn't a set amount but should represent an amount of 'skin in the game' that would be in jeopardy if you were to be in breach of contract and the deal falls through. The average amount of earnest money varies, but it is usually at least $500 or $1,000. If the property is greater than $300,000, it should be a bit higher. Your agent will receive your earnest money check , your signed purchase offer documents, and your lenders prequalification letter and submit the entire package to the listing agent of the subject property. It could take hours or days to receive a response or acceptance of your offer. This can be a very anxious time, be warned.
Fifth - Offer accepted! For the purpose of this explanation, we'll assume you made a good offer and sellers accepted it as is without countering any of the components. Your agent will receive notice and the signed (executed) contract. What was previously a purchase offer is now a binding contract! Your agent will take the whole thing and submit it to the title (escrow) company where they will OPEN ESCROW and deposit your earnest funds. Your agent will also provide your lender with the executed contract so they may begin their work.
Sixth - Inspections. This is the time to conduct your DUE DILIGENCE that covers any and all inspections you wish to do on the property. Home Inspections, Termite Inspections, Well Inspections, Water Tests... This is also the time to find out about the cost of homeowners insurance, flood hazard insurance, sex offenders, airports or other nuisances that you could discover which could be a deal breaker. The INSPECTION PERIOD on the contract determines the length of time you have opted to conduct the due diligence. On or before the last day you and your agent will get together and create a Buyers Inspection Notice and Sellers Response (BINSR) where you can ask for repairs needed as discovered during your inspections, you can cancel, or you can just accept the property with its flaws and all. SELLERS ARE OBLIGATED TO RECEIVE A COPY OF ALL INSPECTIONS AT NO COST ON REQUEST. So we may not hold them back. They need to be released to them as soon as possible. It helps ease the shock as sometimes there are a lot of things that need attention. There will be a short back and forth about what Sellers will or won't do after this. Presuming you agree upon repairs etc...
Seventh - Appraisal. Now that the inspections are done, the appraisal has to be scheduled right away. You, as a buyer, usually pays for the appraisal up front. The appraisal is a detailed lengthy report conducted by an appropriately licensed appraiser. They will coordinate their site visit with the listing agent. About a week after their site visit, the appraisal report is usually submitted to the lender. The property must appraise for AT LEAST the value of the sale per contract. If it doesn't there are only two ways to move forward in the deal. Either the seller has to agree to sell for the lesser price OR the buyer has to make up the difference.
Eighth - Title Commitment / Report. The escrow company will conduct research on the subject property and provide a Title Commitment that reviews the conditions that need to be met to transfer clear title from seller to buyer. They will also discover if there are issues with legal access, tax leins, judgments and such. It is rare, but sometimes problems discovered during this process can be insurmountable. Fortunately that is a rarity. They will provide all parties a copy of the Title Commitment. You, as a buyer, should review it within 5 days of receiving it.
During this entire time you will be in constant contact with the lender as they will require lots of documentation, pay stubs, forms, bank statements, tax returns in addition to needing you to sign many forms and disclosures.
Eighth - BINSR Repairs. If the seller agreed to do any repairs, they will be working on these and must be completed no later than three days prior to close of escrow. As repairs are done, seller (via their agent) will provide paid invoices and photos evidencing compliance with the agreed upon repairs.
Ninth - Final Walk Through. Ideally 3 days prior to close of escrow, you and agent will conduct a final walkthrough of the property. Property should be empty of all but the items that were contractually set to remain. All repairs should be complete. You may even have a follow up Inspection by your provider to verify some repairs were completed appropriately.
Tenth - Signing! You will meet at the escrow company and they will have all of your closing documents to review, and sign! Once completed they will send the signed package to the lender. The lender will review to be sure all the documents are complete and release funds to the escrow company. At that time the escrow company will be given the green light to upload everything to the county recorder.
RECORDING!!!! ONCE THE COUNTY RECORDS THE SALE, THE PROPERTY IS YOURS AND YOUR AGENT WILL CALL AND LET YOU KNOW ITS OFFICIAL AND THE KEYS ARE YOURS!