Eight steps to buying your home
1. Decide to buy.
Although there are many good reasons for you to buy a home, wealth building ranks among the top of the list. I call home ownership the best “accidental investment” most people ever make. But, I believe when it is done right, home ownership becomes an “intentional investment” that lays the foundation for a life of financial security and personal choice. There are solid financial reasons to support your decision to buy a home, and, among these, equity buildup, value appreciation, and tax benefits stand out.
- Base your decision to buy on facts, not fears.
- If you are paying rent, you very likely can afford to buy.
- There is never a wrong time to buy the right home
- All you need to do in the short run is find a good buy and make sure you have the financial ability to hold it for the long run
- The lack of a substantial down payment doesn’t prevent you from making your first home purchase
- A less-than-perfect credit score won’t necessarily stop you from buying a home
- The best way to get closer to buying your ultimate dream home is to buy your first home now
- Buying a home doesn’t have to be complicated – I will help you along the way
2. Hire me!
The typical real estate transaction involves at least two dozen separate individuals-insurance assessors, mortgage brokers and underwriters, inspectors, appraisers, escrow officers, buyer’s agents, seller’s agents, bankers, title researchers, and a number of other individuals whose actions and decisions have to be orchestrated in order to perform in harmony and get a home sale closed. It is my responsibility to expertly coordinate all the professionals involved in your home purchase and to act as the advocate for you and your interests throughout.
My seven main roles:
As Your Buyer’s Real Estate Agent:
- Educate you about your market.
- Analyze your wants and needs.
- Guide you to homes that fit your criteria.
- Coordinate the work of other needed professionals.
- Negotiate on your behalf.
- Check and double-check paperwork and deadlines.
- Solves any problems that may arise.
3. Secure financing.
While you may find the thought of home ownership thrilling, the thought of taking on a mortgage may be downright chilling. Many first-time buyers start out confused about the process or nervous about making such a large financial commitment.
From start to finish, you will follow a six-step, easy-to-understand process to securing the financing for your first home.
Six steps to Financing a Home
- Choose a loan officer (or mortgage specialist). I am associated with some mortgage specialists that are exceptional.
- Make a loan application and get pre-approved.
- Determine what you want to pay and select a loan option.
- Submit to the lender an accepted purchase offer contract.
- Get an appraisal and title commitment.
- Obtain funding at closing.
4. Find your home.
You may think that shopping for homes starts with jumping in the car and driving all over town. And it’s true that hopping in the car to go look is probably the most exciting part of the home-buying process. However, driving around is fun for only so long-if weeks go by without finding what you’re looking for, the fun can fade pretty fast. That’s why I say that looking for your home begins with carefully assessing your values, wants, and needs, both for the short and long terms.
Questions to ask yourself
What do I want my home to be close to?
How much space do I need and why?
Which is more critical: location or size?
Would I be interested in a fixer-upper?
How important is home value appreciation?
Is neighborhood stability and priority?
Would I be interested in a condo?
Would I be interested in new home construction?
What features and amenities do I want? Which do I really need?
5. Make an offer.
When searching for your dream home, you were just that-a dreamer. Now that you’re writing an offer, you need to be a businessperson. You need to approach this process with a cool head and a realistic perspective of your market. The three basic components of an offer are price, terms, and contingencies.
-The right price to offer must fairly reflect the true market value of the home you want to buy. My market research will guide this decision.
Terms-the other financial and timing factors that will be included in the offer.
Terms fall under seven basic categories in a real estate offer in Texas:
- Schedule-a schedule of events that has to happen before closing.
- Do you want an option period to do an inspection and to give you time to firm up your desire to purchase the property? How much is this option worth to you and for how long? Sometimes this option money can ensure the purchase of a property by the amount paid since it goes directly to the seller.
- Conveyances-the items that stay with the house when the sellers leave. This is a bill-of-sale that goes with the contract even if the “sale price” is zero.
- Commission-the real estate commission or fee, for both the agent who works with the seller and me who works with the buyer (you).
- Closing costs-it’s standard for buyers to pay their closing costs, but if you want to roll the costs into the loan, you need to write that into the contract.
- Home warranty-this covers repairs or replacement of appliances and major systems. You may ask the seller to pay for this and is a common practice in the Austin area. However, with multiple offers this might want to be paid by the buyer.
- Earnest money-this protects the sellers from the possibility of your unexpectedly pulling out of the deal and makes a statement about the seriousness of your offer.
6. Perform due diligence.
Unlike most major purchases, once you buy a home, you can’t return it if something breaks or doesn’t quite work like it’s supposed to. That’s why home owner’s insurance and property inspections are so important.
A home owner’s insurance policy protects you in two ways:
Against loss or damage to the property itself and in liability in case someone sustains an injury while on your property
The property inspection should expose the secret issues a home might hide so you know exactly what you’re getting into before you sign your closing papers. Your major concern is structural damage. Don’t sweat the small stuff. Things that are easily fixed can be overlooked. If you have a big problem show up in your inspection report, you should bring in a specialist. If the worst-case scenario turns out to be true, you might want to walk away from the purchase.
The final stage of the home buying process is the lender’s confirmation of the home’s value and legal statue, and your continued credit-worthiness. This entails a survey, appraisal, title search, and a final check of your credit and finance. I will keep you posted on how each if progressing, but your work is pretty much done.
You just have a few preclosing responsibilities:
- Stay in control of your finances.
- Return all phone calls and paperwork promptly.
- Communicate with me at least once a week.
- Several days before closing, confirm with me that all your documentation is in place and in order.
- Obtain funds for closing and sire them to the title company escrow account for your purchase.
- Conduct a final walk-through of your new home.
On closing day, with the guidance of the escrow/title agent and me, you’ll sign documents that do the following:
- Finalize your mortgage.
- Pay the seller.
- Pay your closing costs.
- Transfer the title from the seller to you.
- Make arrangements to legally record the transaction as a public record.
- As long as you have clear expectations and follow directions, closing should be a momentous conclusion to your home-searching process and commencement of your home-owning experience. And we can celebrate together!
8. Protect your investment.
Throughout the course of your home-buying experience, you’ve probably spent a lot of time with me and we’ve gotten to know each other fairly well. There’s no reason to throw all that trust and rapport out the window just because the deal has closed. In fact, I want you to keep in touch.
Even after you close on your house, I can still help you:
- Find contractors to help with home maintenance or remodeling.
- Help your friends find homes.
- Keep track of your home’s current market value.
- If this home is your primary home make sure you get a Homestead Exemption.
- Handle your first tax return as a home owner. I make sure you have the HUD statement from your close in January following close.
Attention to you home’s maintenance needs is essential to protecting the long-term value of your investment.
Home maintenance falls into two categories:
- Keeping it clean: Perform routine maintenance on your home’s systems, depending on their age and style.
- Keeping an eye on it: Watch for signs of leaks, damage, and wear. Fixing small problems early can save you big money later.
Deciding how much house you can afford
Your lender decides what you can borrow but you decide what you can afford.
Lenders are careful, but they make qualification decisions based on averages and formulas. They won’t understand the nuances of your lifestyle and spending patterns quite as well as you do. So, leave a little room for the unexpected – for all the new opportunities your home will give you to spend money, from furnishings, to landscaping, to repairs.
Historically, banks use a ratio called 28/36 to decide how much borrowers could borrow. An approved housing payment couldn’t be more than 28 percent of the buyer’s gross monthly income, and his or her total debt load, including car payments, student loans, and credit card payments, couldn’t be more than 36 percent. (In Canada lenders apply similar formulas to determine how much a buyer can afford. The Gross Debt Service ratio, or GDS, is not to exceed 32 percent of the buyer’s gross monthly income, and the Total Debt Service ratio, or TDS, is not to exceed 40 percent of the buyer’s total debt load.) As home prices have risen, some lenders have responded by stretching these ratios to as high as 50 percent. No matter how expensive your market though, I urge you to think carefully before stretching your budget quite so much.
Deciding how much you can afford should involve some careful attention to how your financial profile will change in the upcoming years. In the long run, your own peace of mind and security will matter most.
Creating your home wish list
Before the home search begins, I will want to know as much as possible about the features and amenities you desire. To help me better serve you, analyze what you want and what you need in a home’s features and amenities.
- Age: Do you prefer historic properties, or newer ones?
- Style: Do you have a special preference for ranches, bungalows, or another style of construction?
- Bedrooms: How many?
- Bathrooms: How many? Are they updated?
- Living and Dining Areas: A traditional, formal layout, or a more open, contemporary plan?
- Stories: How many?
- Square feet: How much space?
- Ceilings: How high?
- Kitchen: How big? Recently updated? Open to other living areas?
- Storage: Big closets, a shed, an extra-large garage?
- Parking: A garage or carport? Room for how many cars?
- Extras: Attic or basement?
- Play/exercise room
- Security system
- Sprinkler system
- In-law suite
- Hot tub
- Wooded lot
- Patio, deck, or porch
- Laundry room
- Location, location, location
Where you buy not only affects the home’s current and future value, but it also affects your lifestyle. I will be able to conduct a more targeted home search if you outline your preferences in neighborhoods and nearby amenities. Here’s a checklist of items you should consider and communicate to me:
- Urban, suburban or rural
- Commute time
- School districts
- Desirable neighborhoods
- Proximity to the airport
- Proximity to restaurants and retail
- Access to major highways and thoroughfares
- Access to public transportation
- Health care facilities
- Parks and recreation
- Length of time you plan to live in the home (I am knowledgeable about growth trends and projections that could affect your investment.)
Opting for new home construction
Whether to buy an existing home or have one built is yet another decision to make during the home-buying process. If you decide to go with new construction, I can be a powerful advocate in your corner as you negotiate upgrades, a move-in date and other terms with the home builder.
Below are some basic pointers to prepare you for the journey ahead.
Selecting a builder
Shopping for a large production or custom home builder can be a daunting task. Start by defining what architectural styles appeal to you and then seek out the builders in your area who offer those styles. Due diligence is essential. Ask friends for referrals to get firsthand accounts; verify the builder’s state license status, if applicable; and check whether they’re certified by the National Association of Home Builders.
The builder representative and me
A builder representative’s ultimate goal is to sell you a home. His or her role is to provide a wide range of information to help you in your decision-making, from building restrictions, roads and easements to inspections, warranties, rebates and upgrades. I am very knowledgeable in new-home construction will be able to help you wade through all the data and point out the downsides and upsides of each line item. I can also can look out for your interests in reviewing the builder’s contract, which often contains more legal jargon than consumer-friendly language.
It’s all about timing
Market conditions greatly dictate a builder’s incentive to make a deal you cannot refuse. When a builder has inventory on his hands, his carrying costs start adding up. When this happens, a builder might be more amenable to strike a favorable deal, whether it’s throwing in upgrades or taking a bit off the asking price. I can help you know when market conditions are right for these benefits. Also, watch for builder close-out sales. Builders promote these special events when a new subdivision is near completion but empty inventory still remains.
A word about paying up
While there are always exceptions, most builders require a deposit when a purchase agreement is signed. They also require that the buyer pay for any upgrades prior to closing. If you back out prior to closing, unless the agreement states otherwise, you will lose that money. Make sure you understand every detail in the builder’s contract before signing it.