Buying a home is one of the most rewarding things you'll ever experience in your life. It's the fulfillment of years of hard work. It's a bright future for you and your family. It's the start of a new beginning. Home ownership is part of the American Dream, but like many aspects of American life, it has become an involved process. When you work with me, I will provide the information, guidance and expertise that you’ll need to help make the home buying process flow as smoothly as possible.

I have prepared this guide to help explain the home buying process and the stages involved. As always, please e-mail me if you have any questions or just want to talk!

Diane Turner

The home buying process involves common stages for all home buyers. To help you understand this process, click on each step below or just scroll down to read through the entire process in sequence.

1. Before you begin your search
2. Overview of the area
3. Discuss Buyer Agency
4. Determine your needs and desires
5. Determine your purchasing power
6. Meet with a lender to discuss mortgage approval
7. Preview homes
8. Make an offer to purchase by writing a contact
9. Contract Acceptance
10. Home Inspections
11. Select Settlement Attorney and Insurance Company
12. Arrange for termite inspection
13. Obtain hazard Insurance
14. Contact the Utility Companies
15. Pre-settlement inspection
16. Settlement
17. Moving Day


1. Before you begin

Before you begin your house-hunting trip, you need to sit down and do some planning. Your planning includes determining how much house you can afford to buy. This depends upon two things: how much you can afford to pay each month and how much you can invest in a down payment.

Your monthly house payment will include principle and interest on your mortgage as well as property taxes and hazard insurance. All of these costs are abbreviated as P.I.T.I.

In addition to P.I.T.I, some buyers may have to pay home owners association dues, condominium fees and mortgage insurance.
An affordable home in today’s market is determined by the financing which translates into the monthly payment. Although there are many ways to qualify to buy a home, make sure that the monthly payment makes sense to you.

The amount of money that you qualify for will depend upon a variety of factors such as credit history, size of down payment and length of employment. It is important to know that the larger the down payment, the less money that you will need to borrow. This means that your monthly payments will be lower. But, remember, in addition to your down payment, you will need money for closing costs, moving, appliances and other miscellaneous expenses. Be sure to consider these additional expenses when you are considering your loan payment.

There are many mortgage programs available today to help the first-time and the current homebuyers to be able to purchase a home sooner. Be sure that you are comfortable with the amount of loan and mortgage payment.


2. Overview of the area

Our first visit is an important one. During this visit, I will answer any questions that you may have concerning the different communities in the area. It helps to become familiar with the areas and the amenities. It also helps to know where these areas are in relation to your job.

Commuting distances and traffic patterns can make a difference if you do not have a flexible work schedule. I will help you find the information that you need to ensure that your commuting distance is realistic. I will also provide you with mass transit commuting alternatives if they are available.
 

3. Discuss Buyer Agency

During our first visit, I discuss buyer agency and tell you what this entails.

4. Determine your needs and desires.

Usually we would have had a conversation before we meet at my office to discuss what you need and want in your new home. If these requirements have not been previously discussed, we will take the time to define them now. I will ask you about the number of bedrooms, bathrooms, style of home and all of the amenities that you would like to have. Being perfectly clear about what you require will make searching for your new home much easier. Don’t forget to consider the time that it will take to commute to your job. The location of your home in relation to your job can be critical. Long commutes in the morning and afternoon can alter the enjoyment that your new home will bring.

Once you have defined your requirements, I will enter the information into the computer and search the database for homes that match your selection criteria. Being able to use the computer allows us to preview a lot of homes before we actually take a tour of the properties.
Of course we may have to make a few changes before we get it right, but, once we refine our search, the process will flow smoothly. Usually, you will have to see two or three homes before you (and I) will know exactly the home that you are looking for.

5. Determine your purchasing power

It is a wise decision to speak to a lender before you begin your home search. The lender can help you determine your purchasing power. A lender can either provide you with a pre-qualification or a pre-approval before you begin your search.
 

6. Meet with a lender to discuss mortgage approval

If your lender provides you with a pre-qualification, it means that your financial information was used to estimate the maximum mortgage that you should be able to obtain. This is a guideline and not a guarantee that you will be able to obtain the stated amount. Most lenders use a formula to determine how much of a mortgage you can afford. Typically your mortgage payment should be no more than 28- 30% of your total gross income. The total gross income is your salary before taxes. In addition, your total monthly debt should be no more than 36-40 % of your gross income. Your total monthly debt would include such things as car payments, credit card debt and loans.

A pre-approval is a formal process that your lender will use to find out exactly how much the lender is willing to let you borrow. You will need to provide the same information that is required for the pre-qualification plus you will have to complete a loan application. At this time, your credit history, your employment and your down payment funds will be verified. This is a guarantee of a loan.

After your mortgage has been approved by the lender, you will receive a loan commitment which states the mortgage amount, interest rate and length of the term of the loan. Be sure to check the document over carefully and follow the specific instructions before you sign it and return it to the lender.

The lender will also require a home appraisal and a title search of the property after you have an accepted contract. The lender will coordinate this process and let you know the findings when the home appraisal is complete.

There are some excellent advantages for getting pre-approved over being pre-qualified. Your interest rate will be locked in for a period of time and you may be in a better bargaining position with the seller since the seller knows that the loan can be secured. At the completion of the pre-approval process, the loan officer will send you a good faith estimate of the closing costs that will be part of the financing.

Closing costs are one time charges that include the origination fee, which is usually one point or one percent of the loan amount, plus other points that may be required. These discount points will lower the interest rate. Other one time fees include fees for the home appraisal, the credit report, document preparation and underwriting of the loan. Some of these fees may be tax deductible at tax time.

Under the Real Estate Settlement and Procedures Act (RESPA), you will be provided with an estimate of closing costs by the lender just before closing. In some cases such as in the purchase of a new home, the seller may pay some of the closing costs. Closing costs vary from area to area and transaction to transaction.

7. Preview homes

After we have searched for homes on the computer and determined which homes you would like to see, I will make the appointments and we will begin our tour. It is not uncommon to find that after you look at one or two homes that you would like to refine your search. Usually, after visiting three houses, you (and I) know exactly what you like and don’t like in a home. When you find the perfect home, the next step is to make an offer to buy.

8. Make an offer to buy by writing a contract

After we have previewed the homes and found the right house, we are ready to make an offer. Before we determine how much we are going to offer for the home, we will check the comparative homes in the area to see if the home is fairly priced. This competitive market analysis or CMA identifies all of the homes that have sold in the neighborhood. The price of the home will be carefully considered in relation to the homes that have sold in the past.

The next step is to write the offer by submitting a signed real estate offer to purchase with the type of financing you desire. This will be the sales contract once the seller accepts. When you and the seller sign, you are agreeing to all of the conditions in the contract. For that reason, it is very important that you understand every detail.

The purchase offer will acknowledge agency and state that I represent you as the buyer. It will also identify how much earnest money you will be putting down and who will be holding the money that will be applied toward your down payment at the time of settlement.

The contract will also describe the property and provide a detailed list of the items that will be conveyed with the sale of the home. These items include light fixtures, washers, dryers, storm windows, storm doors, and other items that are not physically attached. It is important that all of these items be identified and included in the offer and that they are specified in writing. Misunderstandings based on verbal agreements can delay settlement and cause friction.

There are also provisions for certain contingencies such as a Home Inspection, financing and other contingencies as directed within the offer. You will usually have to pay for the home inspection but the detection of a problem is well worth the price of the inspection.
A termite inspection will be discussed in the contract. The results of this inspection may further require payment for removal of the infestation and repair of any damages form the infestation. You should get a written report at settlement indicating that the property is free and clear of any active termite infestation. In some areas well and septic certificates are also required.

In addition to this, the contract will include the legally required disclosures as well as the closing and occupancy date. You will receive the keys to the property on settlement date. If for some reason you can not secure possession on that date, an arrangement with the seller for post settlement occupancy with a rent back provision will be made at this time.

When the purchase offer is complete, I will take it to the listing agent who will discuss it in detail with the seller.
 

9. Contract acceptance

After the contract has been reviewed by the home seller it will be returned to the home buyer. The contract may be accepted, rejected or a counter offer may be made. If a counter offer is warranted, the buyer has an opportunity to accept the counter offer, modify it or reject the offer totally. The offer to buy becomes a ratified contract when all parties have initialed every counter and signed the offer.

10. Home inspections

After the contract has been accepted, you may schedule the home inspection. The home inspection cost will vary depending upon the size of the property and the complexity of the inspectors report. The cost will be a minimum of $250.

The home inspector will investigate the home looking for serious problems in heating, roofing and plumbing. He will check the insulation, paint, electrical outlets and the appliances such as the washer, dryer and the dishwasher to be sure that they are functioning properly. If no serious problems are found, the inspection can pay off indirectly by assuring you that you are making a sound investment. If defects are found, they will be addressed with the home seller and the listing agent for correction.
 

11. Select a Title Attorney

You have the right to select your own title attorney or insurance company. You should shop and compare prices before determining what attorney or title company that you will use to conduct your settlement. I can provide you with a list of companies that service the local area.

12. Arrange for termite inspection
Termite inspections will cost approximately $70 to $75. I can provide you with a list of several companies to choose from.

13. Obtain hazard insurance

You have the right to select your own hazard insurance company. You should shop around and compare prices. Also, do notwait until the last minute to contact an insurance company to purchase insurance. It is important to contact an insurance agent as soon as possible after contract acceptance.

14. Contact the Utility Companies

Several weeks before you move, be sure to contact the utility companies. I will provide you with a list of the utility companies that service the area here your new home is located.

15. Pre-settlement inspection

This is known as a walk-through inspection which can be done either on the day of settlement or up to five days before. The purpose of this inspection is to determine if all of the conditions in the contract have been met. It is up to the buyer to perform the walk-thorough inspection, not the seller. The seller may or may not be present at this time. The home seller should make sure that the utilities are on so that all equipment can be operated.

16. Settlement

This is the big day! You will meet in the title attorney’s office and sign a lot of papers. At the completion of the paper signing, you will receive the keys to your new home.

The home buyers, the home sellers and their agent will be at the settlement along with the settlement attorney who will conduct the proceedings. Prior to the settlement, the attorney will have searched the title, provided title insurance and obtained old and new lender instructions. Before you sign any papers, all unresolved walk-through deficiencies will be resolved.

Then, the attorney will explain the deed of trust or mortgage note, lender forms and settlement sheets. You will sign all of these and pay the balance of the down payment and closing costs with the cashiers or certified check that you have brought to the settlement.

Settlement fees vary widely depending upon the price, location and other factors. Overall, the cost will usually average between 3 percent and 7 percent of the sales price. Items that comprise this fee includes the loan origination fee, mortgage insurance premium, attorney fees, owner and lender title insurance, recording fees, county tax stamps, state tax stamps and the survey fee. In addition the lender will require an appraisal fee and a credit report in advance of the closing. There may be other items that are not required to be listed under the law that will be paid at closing as well. These may include advance deposits held in escrow for real estate property taxes and insurance. The lender collects a portion of these every month and then pays the taxes when they are due.

Sometimes closing costs can amount to a large sum. Items such as the loan origination fee, prepaid insurance and property tax adjustments may be tax deductible.

17. Moving Day

The day is finally here! You're finally at home in your perfect house!
Everyone's moving routine is a little different. Remember that I'm here to help you out. Just because the real estate transaction is complete doesn't mean that our relationship ends. Give me a call if you have any questions or need advice. I pride myself on my friendships with many of my past clients and look forward to maintaining a long friendship with you as well.