The Buying Process Explained
A home is most likely to be your biggest financial investment. Before you begin, do your homework.
This Guide will explain to you some things to keep in mind as you begin your search for that home of your dreams.
Finding a Real Estate Professional. This process is too important and can get complicated. We do this every day and can help make the process much easier and most likely save you time and money. Contact any of our Professionals for a complimentary, confidential consultation. Your buyer’s agent fees are usually paid by the seller through a cooperating agreement.
Your professional buyer’s representative or agent has access to a network of contacts and can draw from extensive market knowledge to help pinpoint the right house for you quickly.
While you’re not required to have buyer’s representation, you will have it by default. If you don’t have someone looking out for you in the transaction, the seller’s agent will function as your agent. Having your own representative or agent working to protect you is just smart.
A professional can also help you structure your deal to save money, explain the advantages and disadvantages of different types of mortgages and guide you through the paperwork.
1. What do you feel comfortable spending on housing?
How much house you can afford is dependent on how large a mortgage – your home loan – you feel comfortable with. Some have a dollar figure; some base it on a percentage of net income.
Start your research by using the simple mortgage calculators on our website to see whether you can afford to pay the monthly mortgage on the kinds of houses you have in mind.
Purchasing a home involves more than a monthly mortgage payment. You’ll also have to consider money you’ll need to have at hand when you make an offer, when you close on a home and on a monthly basis after the home is yours.
Additional costs associated with an offer and closing can include:
• Earnest Money Deposit, usually 1% to 5% of the cost of the house, proof that you’re a serious buyer.
• The down payment, usually 10% to 20% which you pay at closing.
• Mortgage Insurance or MI, PMI.
• Closing costs, usually 4% to 5% of the cost of the house, to pay for processing and closing the loan.
2. Shopping for a home
House hunting can be both exciting and frustrating.
The time and amount of homes you see depends on you, your needs and wants and how honest you are communicating that to your Realtor. I have sold the first home I’ve shown to a client and I have shown some clients 20 homes. To make the search easier and faster, over 90% all house hunters today begin by browsing for properties on the Internet, using web sites like this one. This site offers a unique search engine for shopping and includes an alert system. You will have access to the same listings as Realtors for Metro Louisville, the surrounding counties and some limited listing in Southern Indiana. This information is up-to-date and accurate. Other sites on the internet may not provide up-to-date data making it very frustrating when you call about a beautiful house you just saw on a website and it’s been sold for a week.
The Internet is a quick way to see whether the houses that are currently available meet the following critical criteria: in the right location, with the right features and at the right price. If you find, after your search on our website, that few properties meet with your expectations, you may want to readjust your criteria – change the location, features, price – to increase your chances of finding a house that works for you. If you have any difficulties in this initial search, feel free to contact us for assistance.
Once you know what you want, where you want it and what you can afford, it’s time to see the houses in person; you’ll be surprised at how different they are from the pictures. Stay focused by making a checklist of things important for your future home including:
• Is the house in move-in condition or will it need work?
• Is it close enough to everyday needs, such as grocery stores, schools, work?
• Will you feel safe here?
• Is the yard right for your needs?
• Is there room to grow?
• Does the floor plan fit your lifestyle?
• Is there enough storage?
3. Mortgage Research
Your Buyers’ agent can assist you by explaining the various types of financing options and can introduce you to mortgage professionals. There are a variety of mortgage types available today, each with advantages and disadvantages depending on how long you plan to live in the home, the financial marketplace and your income potential, among other things.
There are also several government mortgage programs available, including FHA mortgages, which are designed to help people who might not qualify for conventional programs or have 20% to put down.
4. Make an Offer
When you’ve found a house you really want, it’s time to make the offer.
How much you offer may depend on a number of factors. Here’s where having an agent and the legwork you put in while shopping for a home pays off. Your agent will assist you in mapping out an offer strategy based on several factors including market value, condition, time on market and what you feel you’re willing to pay. The details of the offer are spelled out on our markets 7 page offer including:
• A complete, legal description of the house
• The amount of earnest money you’re paying
• The down payment and financing details
• A proposed move-in date
• The price you’re offering
• A proposed closing date
• The length of time your offer is valid
• And other details of the deal
This can be just the beginning of the negotiation process. The seller has three options: accept your offer, counter your offer or reject your offer. Your agent will advise you on the best way to present your offer for a good outcome.
5. Contingency Period
When your offer has been accepted, you are considered “under contract” and the contingency period begins. This is time that allows you to obtain financing, perform inspections and satisfy any other contingencies of your purchase agreement.
Obtaining financing might include loan approval, which will include an appraisal of the property. Also be prepared to make your down payment, which is usually due several days before the close of escrow.
Your agent will assist in scheduling a professional inspection of the property; it is one of the best safeguards you can take before buying. A home inspector should check (and may give you a rough price for repairs on) the electrical system, plumbing and waste disposal, the water heater, insulation and ventilation, water source and quality, pests, foundation, doors, windows, ceilings, walls, floors and roof.
Keep in mind that the inspector isn’t there to tell you whether you’re getting a good deal. He or she is there to give you an educated opinion on whether the house is structurally and mechanically sound and fill you in on any repairs that are needed.
6. Complete Settlement or Closing
When the property you’re buying has been inspected and you’ve had your final walk-through of the property to see that all contingency conditions – such as final repairs made by the seller — have been met, it’s time to face the paperwork. You will be signing loan documents and closing papers, paying the balance of your down payment and closing costs. This is the day you get the keys to your new home.