Buying a Home

Remember the first time you were old enough to decorate your own room? It felt so special to have your own private sanctuary, your own little nest. Well, multiply that feeling by about a trillion times: that’s how excited you’ll feel when you buy your own home!

Unfortunately, when you’re buying a home, you also have to multiply the workload by a trillion times…. and, if you’re not prepared, the headache. If, however, you are prepared and get organized, then the process of buying a home is really just a step-by-step process. Sure, it requires a lot of mental energy, and you’ll find yourself filling out lots of paperwork, but as long as you know what you’re in for, buying a home won’t give you a migraine. Rather, it can be one of the most exhilarating experiences of your life!

To make it simple for you, we’ve broken down the home-buying process into ten steps.

Some people think the home buying process begins with the first Open House you attend. Wrong! There’s quite a bit of prep work to be done before you even start looking at homes.

First, check your credit. Chances are, you won’t be paying for your new home in cash. The vast majority of homeowners purchase their home with some type of home loan or mortgage. The kind of home loan you get relies heavily on the kind of credit history you already have. Prospective lenders will all have a look at your credit report before offering you any home loans or mortgages. Be sure to get a copy of your credit report and check it out before they do. Why? Several reasons. First of all, check the report for errors. You’d be surprised at how common errors are.

Second, understanding your credit history will help you understand the kinds of mortgage offers you’ll get once you start getting them. Basically, your entire credit history adds up to calculate your overall credit score, which ranges from 340 to 820. In simple terms, 340 is bad, and 820 is good. Where you are on the spectrum will determine what kinds of offers you’ll get. If you have less-than-stellar credit, you’ll unfortunately have to expect less-than-stellar offers. This is because a low credit score makes you a “high-risk” borrower in the eyes of lenders; they won’t give you their best offers, because they’ll fear you won’t be able to pay them back.

However, you also need to know your worth. If your credit history is good or average, there’s no reason to settle for lesser offers than you’re capable of handling. This is reason number three you should check out your credit history: know your worth! When the time comes to mortgage-hunt, you’ll want to shop around for the very best offer you can find.

Once you’ve got your credit report, research the mortgage industry. What types of loans are out there? Which ones do you feel you’ll qualify for? This info will help you greatly when deciding whom to approach with a home loan request. As well, keep in mind the old saying “Knowledge is power!” The more you know about the mortgage industry, the more questions you can ask of your lenders, giving you an overall better picture of what it is you’re signing up for.

Finally, research home buying processes in your area. Friends and family from across the country will no doubt offer their advice, but what good are Wisconsin real estate laws to you if you’re shopping for a townhouse in California? Get as local as possible when researching real estate customs. The best thing to do is interview a real estate agent as to how the process works in the area where you’re looking to buy. You’re not obliged to hire the same agent who gave you advice, but if you really like them, you might keep them in mind for when Step Four rolls around.

Imagine that you’re selling a home, and you get two offers. One person quotes you a lovely number. The other person quotes you a similar number AND hands you a piece of paper from a lender, guaranteeing that this person actually has access to the money he or she is promising. Who will you sell your house to? Chances are, you’ll trust the written word over the spoken word. That’s why it’s important to get pre-approved for a mortgage. Sit down with a lender and speak to them. They’ll check out your credit history, and give you an official letter stating how much of a mortgage you qualify for. Having this number in writing will make you more attractive to sellers than your competitors are. There have even been cases of sellers accepting lower offers over higher offers, simply because the lower offer came along with written proof of a mortgage pre-approval.

This is the fun part. It’s when you get to sit down with a pen and paper and describe your dream house. Real estate experts suggest breaking down your brainstorm into lists. List number one should contain must-have features. A backyard, a crawl space, three bathrooms, floor-to-ceiling windows… It doesn’t really matter what these features are; the point is, you won’t invest money into a house unless it has them. List number two should be pluses; you’d like a spiral staircase but can live without one; you wouldn’t say no to a dishwasher, but can buy your own.

List numbers one and two should also take into consideration things like location. You have to be near a fire station, hospital, grocery store or tanning salon, for example. You’d like to be walking distance to a forest or beach… but can live with a short drive, as well.

List number three is also important: it’s the absolutely-not list. These are the features you will NOT tolerate. A shower stall instead of a bathtub; a million front steps leading to the front door. A desperate an urgent need for extensive renovations. Again, don’t just limit yourself to features within the home. Consider the location. You won’t have your bedroom look out onto a major highway; you refuse to have a hydro tower in your backyard; you don’t want to buy a condo in a building where you’re at least sixty years younger (or older) than all the other residents.

Knowing what you want, would like, and refuse to live with can greatly narrow down your search when the time comes to home-hunt.

You might also want to consider resale potential, if you’re planning to move out at some point in the future. Think about the home’s desirable features, and weigh it against its undesirable features. If, for example, you’re moving into a home in an obviously family-oriented suburban neighborhood, but your home has only one bathroom and barely any storage space, chances are, it’ll be a hard re-sell.

Now is the point where you should start looking for a real estate agent to help you with your home search. You know what you’re looking for, so you can consult with agents about your specific situations. You’ve also done all your financial homework, complete with your mortgage pre-approval, so you know exactly what your price range is. It’s a good time to start approaching buyer’s agents for assistance with your home hunt. Unlike seller’s agents, who work specifically for those selling homes and who you’ll encounter when viewing specific homes, a buyer’s agent works for you and advises you throughout the various steps of the buying a home process.

Interview several agents before making a decision. Ask about their experience and check out their references. Above all, trust your gut instinct. It’s imperative that a buyer’s agent be loyal and have your best interests in mind. When you find a home you like, the buyers’ agent can advise you on how to make a realistic offer.

Time for another fun part! This is when you actually get to go on your quest for the home of your dreams. Maybe you’re determined to live in a particular neighborhood; maybe you’re looking for a particular type of home, and are flexible about the location as long as it has all the features you want. Either way, check multiple sources for leads about the home that you want. Places to look include:

Also, go on walks or drives and explore neighborhoods. Be on the lookout for For Sale signs, and arrange to view the homes in which you are interested.

Eventually, after viewing numerous houses, you will have hopefully found one that you like. Once you’ve decided to make an offer, check out all the little last-minute details before you actually present that offer. By details, we mean things like: what is the resale potential? Is the heating system efficient? The cooling system? How much renovation does the house need, and how soon will you be able to afford to do it? Your buyer’s agent can advise you on little things to look for.

Now comes the tough part: strategizing. If your offer is too low, you run the risk of turning off the seller. On the other hand, if your offer is too high, you might end up paying more than the seller is willing to sell it for—and who wants to pay more than they have to? Your buyer’s agent can be a big help here. He or she can advise you on a realistic offer that maximizes your chances of getting the home, but still gets you a good deal.

Avoid seller’s agents like the plague at this stage of the buying a home process. The reason? Simple: seller’s agents work for the seller. They want to get as much money as possible for the seller, because they themselves are looking forward to a commission, a percentage of whatever the house sells for. Do the math: the more the buyer pays, the more the seller’s agent gets. Turn instead to the buyer’s agent, the agent representing you.

Step Eight: Home Inspection

So, you’ve made the offer, and the offer has been accepted. Before you start packing your bags, though, make sure there has been a home inspection, and that any work orders have been completed.

Before you move in, a home inspection must be done. Every home inspection should include a checkup of the following:

· Foundations

· Roof

· Heating and air conditioning systems

· Ventilation

· Common areas (for condominiums)

· Septic tanks, wells or sewer lines*

· Insulation

· Plumbing and electrical systems

· Ceiling, walls and floors

· Doors

· Hazardous materials concerns

It is the seller’s responsibility to conduct this home inspection, and to carry out and fund any possible work orders that result from a less than satisfactory inspection. You cannot close the deal until all this has been completed.

This is the tedious but mandatory part; until you have completed all the paperwork, you can’t count on actually owning the home. At this point, make sure you don’t do anything to irritate your lenders. This includes making major purchases (it can affect your mortgage payments) or switching jobs. You’ll also have to obtain hazard insurance, and switch utility providers. Don’t forget to cancel any services in your name at your old home!

That’s it! You’re done. Welcome to your new home!

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