- Get Pre-Approved – This step involves contacting a lender and finding your eligibility to purchase a home. This is not a guarantee from a lender. You will receive a letter that states the amount of a loan you qualify for. The lender should discuss with you different loan programs and how these loan programs fit your needs. Bes ure to tell the lender and your Realtor if you qualify for a VA of FHA loan. This letter does not guarantee you a loan!
- Find a Realtor – It is best to get your own representation when buying a house. Be sure to discuss agency with your Realtor. Be sure that the person who is showing you homes is a Realtor, not just a licensed salesperson; yes, there is a difference. Make sure that you are confident that the Realtor you have picked is working in your best interest. Tell your Realtor what you are looking for and get them to email you or mail you active listings. This can help narrow down your search and weed out any homes that you are not interested in.
- Look at Houses! – In our area, the purchase agreement addresses issues that may arise when purchasing a home. These issues include financing, home inspections, default, earnest money deposits, and settlement. It is very important that you understand these terms and their significance. Once a contract is ratified, all parties agreeing to the terms listed in the contract, the contract is legally binding. This agreement must be in writing to be enforceable. Be sure you understand what you are signing. Keep in mind that your Realtor is not an Attorney; they can not offer you advice or interpret the contract.
- Contingencies – Basically, contingencies protect you in case you cannot perform or choose not to perform on a promise to buy a home. If you cancel a contract without having built=in conditions and contingencies, you could find yourself forfeiting your earnest money deposit. Common contingencies are Home Inspections, Radon Inspections, the Sale of the Purchaser’s Home, and Full Loan Approval. These items are included in our purchase agreement, but are not addressed until after ratifications. These items can help you disccover more information abou the home and you can use that information in helping you make your decision to go through with the purchase. These contingencies do not mean that the Seller has to renegotiate the sales price if you are unhappy with the information you have received. They do mean the the Buyer and Seller can come to terms on how the information should be addressed. If the Buyer and Seller can not come to terms in the allotted amount fo time, the contract can be voided. Sometimes the Seller may elect to offer money to the Buyer in lieu of fixing a problem discovered during a contingency period. Be careful with this, not all lenders allow a Buyer to receive money from a Seller over a certain amount. If the Seller has already agreed to give you closing cost assistance, you may not be able to accept any more money from the Seller. Lowering the price of the home may not be a good solution either. It is best for all parties to get the Seller to fix the problems before Closing.
- “AS-IS” Contracts – So, you have decided to write on an “AS-IS” house. This means you are either getting a really good deal from a Seller, you are writing on a house that has an “estate” as a Seller, or you are writing on a Short Sale or Foreclosure. All of these types of contracts are a little different from a regular sales contract. The main difference is the “Seller” has no obligation to fix any items that need repair in the house. This includes the treatment and repair of termite damage. There are safeguards that can still get you out of an “AS-IS” contract, but you and your Realtor need to write them into the original offer. Most of the time you can still do a home inspection on an “AS-IS” home, but the home inspection will be for informational purposes only. It is extremely important that you thoroughly understand the Short Sale and Foreclosure process. Ask questions and make sure you are comfortable with the risks.
- Offer is Ratified – Congratulations, you have a contract on a house! Again, ratification is when all parties have come to an agreement to the terms of a purchase contract.
- Formal Application to Lender – A Buyer has 7 days from the date of ratification to make formal application to the lender.
- Short Sale Contracts – This is when the wait begins. Short sales can take from 30 days to 11 months to get bank approval If you don’t have time to wait, short sales may not be the transaction for you! You need to decide if you want to go ahead and do your home inspection now or wait until after you get short sale approval. There are advantages to both.
- Home Inspection, Radon Inspection, and Lead Based Paint Inspection – These are a few of the Contingencies discussed while writing the Offer to Purchase. Each of these Contingencies has a time deadline that the Buyer set while writing the Offer to Purchase. It is very important that you adhere to this timeline. If you you neglect to give the Seller the Addendums regarding these Contingencies you could be forfeiting your write to void the Sales Contract based on the findings. It is best to order these inspections and test as soon as the contract is ratified. Your Realtor can give you a list of Home Inspectors, Radon Inspectors, and Lead Based Pain Inspectors. Be sure you choose someone who is reputable, licensed, bonded, and insured.
- Appraisal – This is a professional estimate of the current market value of a home. The lener will call out an Appraiser after you make formal application for a loan. The Appraiser works for the Lender, not the Buyer and not the Seller. You need to ask your lender for a copy of the appraisal. However, they may not give it to you until after closing. If the appraisal comes in low, there are several options for the Buyer. A second appraisal can be called out. Paying for this appraisal can be negotiated between the Buyer and the Seller. The Seller may choose to lower the sales price to the appraised value, but if you have asked for closing cost assistance, you may lost that assistance. The Buyer can choose to come up with the extra money to buy the house of the Seller does not want to lower the sales price. The Buyer and Seller could come up with a suitable sales price. Or the Buyer can void the contract.
- Home Owner’s Insurance – Call around and get rates for Home Owner’s Insurance. You need to give your lender this information. Do this as soon as possible. Property Insurance has become difficult to obtain in some cases. You may want to get your Realtor to ask the Seller who they have as an insurer.
- Loan Approval – The lender will send a letter, when requested, that states that all conditions of the loan have been met and that the loan is ready to close. Essentially this mean that you can buy the house! Your Realtor needs to get a copy of this letter to the Listing Agent within the specified amount of time, which you determined when you wrote the Offer to Purchase. This letter may not be ready until the day of closing, or it could be ready weeks in advance. It is important to stay in contact with your lender and ask questions!
- Termite Inspection – Most loan companies require a termite inspection in order to approve a loan. Who pays for this inspection is addressed in the purchase agreement. If the home is being sold “AS-IS,” the Seller may not be responsible for treating a termite infestation. Talk to your Realtor about “AS-IS” houses. The termite inspection must be performed within 30 days of settlement. This means that it is usually not ordered until 2 weeks before closing, just in case closing is delayed. I always recommend that the Buyer pay for their own termite inspection to insure that a reputable pest company is employed. The Seller is still responsible for the cost of treatment and repairs if termites are found, unless it is an “AS-IS” contract.
- Settlement – You will choose a settlement date at the time you write your Offer to Purchase. It is very important that you actually close on the loan on this date. If you the Buyer is unable to purchase the home on this date, the Buyer can be found in default the Seller may be able to keep the Buyer’s earnest money deposit and/or sue for damages. If the settlement date needs to be changed for any reason, get it in writing and have all parties sign off on it! The Buyer needs to bring an ID with photo, down payment, and closing costs to the Settlement table. All funds from the Buyer must be certified. No personal checks! You can also wire the money to the Settlement Company. You may not find out how much money you need to bring until the day of closing, leave enough time during that day to get certified funds. And remember – don’t be late to your closing!
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