The home buying process – a brief,
If you’re like most people, buying a home represents your single biggest
investment – and debt. As such, the home buying process can be one
of the most exciting, but sometimes also stressful, experiences you ever
go through. This may be true whether you’ve bought many homes or
you’re looking to buy your first, whether you’re in the market for
a new primary residence, an investment property or that perfect
Moreover, never has the real estate market offered more great
opportunities, or been fraught with more risks, than now. There are
many factors to consider and many decisions to make. That’s why,
when buying, it’s crucial for you to have all the available resources
necessary to make a well-informed decision, together with the time
required to make complete use of them. That’s also why you should
enlist the help of a trusted REALTOR® who’ll be able to provide you
with expert consultation at each step of the buying process.
Generally, finding and purchasing a home includes the following steps:
1. Define Your Goals, Research Your Options,
Make Your Plans
Given that buying a home is such a big step, it’s all the more important
for you to educate and prepare yourself as much as possible in
advance. This means clearly determining why you’re buying and what
kind of home you’re looking for. And because buying and financing
a home are so closely related, it also means examining your current
financial situation and projecting how much you can afford.
Once you’ve answered these questions, even tentatively, you’ll be in
a better position to research your housing and mortgaging options,
as well as create an action plan and timelines for moving forward. You
may want to do this yourself, but you may also benefit by consulting an
experienced REALTOR® right from the start.
2. Contact A REALTOR®
Buying real estate is a complex matter at the best of times, given
that there are so many factors to consider and no two homes or
transactions are alike. However, with all the unique opportunities and
potential pitfalls of the current market, it’s even more important for you
to contact a REALTOR® once you’ve definitely decided to buy.
In choosing a REALTOR® to guide you through the property search,
financing, negotiation and transaction processes, you should consider
their local market knowledge, experience and track record.
Finding a Realtor - Look no further. Give us a call or send us an email. We'd be happy to help you with any Real Estate needs. Contact Us!
3. Get Pre-Approved For A Loan
Generally, it is recommended that you get pre-qualified for a loan before
you start viewing homes with the serious intention of buying. The preapproval
process involves meeting with a lender and authorizing them
to examine your current financial situation and credit history. On the
basis of this examination the lender will provide you with a document
that details how much you can borrow to buy a home.
You may want to consider looking online to see what different lenders
offer, such as on MortgageMatch.com, or contacting your local bank or
The benefits of pre-qualification include:
• You’ll have information about what you can afford and be
able to plan accordingly
• As a qualified, motivated buyer you’ll be taken more seriously
when you make an offer on a home
• Lenders can tell you whether you qualify for any special
programs that will enable you to afford a better home
(particularly if you’re a first-time buyer)
Real estate financing is available from many sources, and an
experienced REALTOR® will be able to suggest lenders with a history
of offering excellent mortgage products and services. For more
information about the benefits of pre-approval and the loan process in
4. View Homes And Select THE ONE
Simply put, key to the home search process is knowing what you’re
looking for. Among other things, that means distinguishing between
“must-haves” and “like-to-haves”. To help you to target your search
and define your home preference priorities, this guide includes a Home
Search Worksheet on page 28.
That said, here are a few recent facts about the search process that
might put your experience in perspective:
• Almost 90% of buyers use the Internet to search for homes1
• The typical buyer searches for 12 weeks and views 12 homes1
• 81% of buyers view real estate agents as very useful in the
There are many benefits to starting the search process at a real estate
website like REALTOR.com®, the world’s most extensive source for
property information. You can view many homes and their details, take
video tours and access neighborhood info.
However, it’s also important to view homes in person. While their
property details may seem similar online, homes can actually be very
different in terms of layout, design, workmanship and other aspects. In
addition, you should ideally view homes with the help of an experienced
and eagle-eyed REALTOR® who’ll notice things you might miss, provide
expert analysis, and act as an impartial sounding board.
5. Make An Offer And Negotiate With The Seller
Now that you’ve found the home you’d like to buy, it’s time to make
an offer. Your local real estate association, working with legal counsel,
has developed the contracts that are used for transactions in your
area. These contracts enable you to specify a sale price and also
include many clauses for specifying various terms of purchase, such
as the closing and possession dates, your deposit amount, and
other conditions. You should carefully review these clauses with your
REALTOR® to ensure that they express your desired offer. In addition to
drawing up the contract, your REALTOR® will be happy to address all
your questions about the offer process.*
Once you’ve written the offer, your REALTOR® will present it to the
seller and/or the seller’s representative. At that point, the process –
given that a home’s eventual sale price is subject to supply and demand
– will depend on the kind of market you’re in. Generally though, the
seller can accept your offer, reject it, or counter it to initiate the
Successive counter-offers, with deadlines for responding and meeting
conditions, will be exchanged between you and the seller until a
mutually-satisfactory pending agreement is reached or the
Negotiations can involve many factors relating to different market
conditions, homes and sellers.
6. Secure Your Financing
Once you have a pending agreement, it’s time to go back to your
chosen lender to finalize your mortgage details so you can close the
deal. This means finalizing your down payment, interest rate, regular
payment schedule and any other financial conditions associated with
As noted in the section on loan pre-approval, if you’ve already been
qualified with a lender for a certain loan and home purchase, this phase
of buying your new home should be a relatively straightforward
matter that centers around finalizing the loan details and signing
the mortgage papers.
As the old saying goes, ‘let the buyer beware’. Particularly in these
times, when so many buyers are suffering the consequences of having
not fully understood their financing decisions, it’s crucial for you to work
with people you trust. In this regard, a good REALTOR® can be a true
friend for life.
7. Close The Deal
If you’ve efficiently taken care of everything connected with purchasing
your new home, the experience of taking ownership will be a positive
joy with no surprises. Key steps to the closing, also referred to as the
“escrow” or “settlement”, include:
• Getting a Title Search – an historical review of all legal
documents relating to ownership of the property – to ensure
that there are no claims against the title of the property. It is
also necessary to purchase Title Insurance in case the records
contain errors or there are mistakes in the review process.
• The Final Walkthrough – you’ll be given the chance to look
at the home to make sure it’s in the same condition as when
you signed the sale agreement.
• The Settlement – typically, on the Closing Date you’ll go to a
lawyer’s office to verify and sign all the paperwork required to
complete the transaction. The settlement will include paying
your closing costs, legal fees, property adjustments and
transfer taxes. At that point, you’ll receive the property title
and copies of all documentation pertaining to the purchase.
Oh, and one more thing – you’ll get the keys. In most cases,
Possession Date will fall within a couple days, at which point you’ll be
able to move into your new home.
A Home Buyer’s Glossary
When buying a home, it’s important to understand some of the key
concepts and terms. Throughout the purchase process, your REALTOR®
will be available to explain any unfamiliar terms you encounter. That said,
here is a short list of terms you’ll want to know:
Abstract Of Title – A complete historical summary of the public
records relating to the legal ownership of a particular property from the
time of the first transfer to the present.
Adjustable Rate Mortgage (ARM) – Also known as a variable-rate
loan, an ARM is one in which the interest rate changes over time,
relative to an index like the Treasure index.
Agreement of Sale – Also known as contract of purchase, purchase
agreement, or sales agreement according to location or jurisdiction.
A contract in which a seller and buyer agree to transact under certain
terms spelled out in writing and signed by both parties.
Amortization – The process of reducing the principal debt through a
schedule of fixed payments at regular intervals of time, with an interest
rate specified in a loan document.
Appraisal – A professional appraiser’s estimate of the market value of
a property based on local market data and the recent sale prices of
Assessed Value – The value placed on a home by municipal assessors
for the purposes of determining property taxes.
Closing – The final steps in the transfer of property ownership. On the
Closing Date, as specified by the sales agreement, the buyer inspects
and signs all the documents relating to the transaction and the final
disbursements are paid. Also referred to as the Settlement.
Closing Costs – The costs to complete a real estate transaction
in addition to the price of the home, may include: points, taxes, title
insurance, appraisal fees and legal fees.
Contingency – A clause in the purchase contract that describes
certain conditions that must be met and agreed upon by both buyer
and seller before the contract is binding.
Counter-offer – An offer, made in response to a previous offer, that
rejects all or part of it while enabling negotiations to continue towards
a mutually-acceptable sales contract.
Conventional Mortgage – One that is not insured or guaranteed by
the federal government.
Debt-to-Income Ratio – A ratio that measures total debt burden.
It is calculated by dividing gross monthly debt repayments, including
mortgages, by gross monthly income.
Down Payment – The money paid by the buyer to the lender at the
time of the closing. The amount is the difference between the sales
price and the mortgage loan. Requirements vary by loan type. Smaller
down payments, less than 20%, usually requires mortgage insurance.
Earnest Money – A deposit given by the buyer to bind a purchase
offer and which is held in escrow. If the property sale is closed, the
deposit is applied to the purchase price. If the buyer does not fulfill all
contract obligations, the deposit may be forfeited.
Equity – The value of the property, less the loan balance and any
outstanding liens or other debts against the property.
Easements – Legal right of access to use of a property by individuals
or groups for specific purposes. Easements may affect property values
and are sometimes part of the deed.
Escrow – Funds held by a neutral third party (the escrow agent) until
certain conditions of a contract are met and the funds can be paid out.
Escrow accounts are also used by loan servicers to pay property taxes
and homeowner’s insurance.
Fixed-Rate Mortgage – A type of mortgage loan in which the interest
rate does not change during the entire term of the loan.
Home Inspection – Professional inspection of a home, paid for by the
buyer, to evaluate the quality and safety of its plumbing, heating, wiring,
appliances, roof, foundation, etc.
Homeowner’s Insurance – A policy that protects you and the lender
from fire or flood, a liability such as visitor injury, or damage to your
Lien – A claim or charge on property for payment of a debt. With a
mortgage, the lender has the right to take the title to your property if
you don’t make the mortgage payments.
Market Value – The amount a willing buyer would pay a willing seller
for a home. An appraised value is an estimate of the current fair
Mortgage Insurance – Purchased by the buyer to protect the lender
in the event of default (typically for loans with less than 20% down).
Available through a government agency like the Federal Housing
Administration (FHA) or through private mortgage insurers (PMI).
Possession Date – The date, as specified by the sales agreement,
that the buyer can move into the property. Generally, it occurs within
a couple days of the Closing Date.
Pre-Approval Letter – A letter from a mortgage lender indicating that
a buyer qualifies for a mortgage of a specific amount. It also shows a
home seller that you’re a serious buyer.
Principal – The amount of money borrowed from a lender to buy a
home, or the amount of the loan that has not yet been repaid. Does
not include the interest paid to borrow.
Purchase Offer – A detailed, written document which makes an offer
to purchase a property, and which may be amended several times in
the process of negotiations. When signed by all parties involved in the
sale, the purchase offer becomes a legally-binding sales agreement.*
Title – The right to, and the ownership of, property. A Title or Deed is
sometimes used as proof of ownership of land. Clear title refers to a
title that has no legal defects.
Title Insurance – Insurance policy that guarantees the accuracy of
the title search and protects lenders and homeowners against legal
problems with the title.
Truth-In-Lending Act (TILA) – Federal law that requires disclosure
of a truth-in-lending statement for consumer loans. The statement
includes a summary of the total cost of credit.
Title Search – A historical review of all legal documents relating to
ownership of a property to determine if there have been any flaws in
prior transfers of ownership or if there are any claims or encumbrances
on the title to the property.
To buy or not to buy – considerations for
first-time home buyers in this market
Buying your first home is a major step. There’s a lot you need to know
to make the right decisions – and also to avoid making the wrong ones.
And that’s particularly true in this current buyers’ market, when there
are so many homes available and sellers have such diverse motivations.
The good news is that if you know what you’re doing, or if you’re
working with a highly-experienced REALTOR® who does, this market
offers fantastic opportunities to get a great home at a great price.
Owning Versus Renting
Without question, owning a home comes with responsibilities and
risks that you don’t have to worry about when you rent, such as a
mortgage, taxes, homeowner’s insurance, maintenance and repairs,
to name a few
1National Association of REALTORS® Profile of Home Buyers and Sellers, 2010
The Ward Team and your sales associates will provide you with the services stated below as part of your representation agreement.
Counseling - We will conduct a meeting with you to discuss your needs and goals, and to plan the search for your ideal property.
Agency - We will discuss all agency representation alternatives that are available for you and the Sellers.
Representation - We will explain to you the representation agreement and the special services and benefits that it offers.
Financing - We will offer to arrange a pre-approval appointment with a reputable local lender to determine your range of affordability, which increases your negotiating strength.
Properties - We will find and arrange showings for properties that match the criteria you have selected.
Evaluation - We will discuss both positive and negative features of each property you view that may affect it's value and resale in the future.
Disclosure - We will review all property inspection reports and other documents pertaining to the condition of the property you have selected. We will disclose all physical defects of the property that are known to us.
Review - We will thoroughly review the mandated seller's written property disclosure paperwork for disclosed problems. If problems exist, we will assist you in writing remedies into the Offer of Purchase and Contract.
Appraisal - We will explain to you the option of an appraisal contingency.
Warranty - We will explain to you the option of a home warranty plan to reduce your risk of repair when purchasing a property.
Inspections - We will recommend that you obtain both a professional building and termite inspection. Upon receipt of these reports, we will work with you to prepare a request of repairs to present to the seller.
Paperwork - We will prepare a written "Offer to Purchase and Contract" on the property you choose to purchase with terms specified by you. We will present this offer to the listing agent in a timely manner.
Closing - We will monitor and inform you of the progress of your contract as it moves towards the closing stage, including the satisfaction of all contingencies and conditions.
Walk Through - We will accompany you on a thorough walk through of the property prior to closing, and we will provide assistance to resolve any problems discovered during that walk through.
After Sale - We will contact you after the closing to follow up on any remaining details or service needs.
When buying a home there are always some things that are good to know ahead of time. Below is some information that will help make your transition to the area go as smooth as possible.
Mortgage Calculators - One of the first things to do when starting your home shopping is to decide on your price range. To do this, you can use any number of available affordability calculators on the Internet.
Online Listings - Once you come to a conclusion about your price range, you will want to scan through some home listings online in your price range. You can start this search by taking a look at our current listings.
Pre-Qualifying for a Loan - To prepare yourself to make competitive offers on homes, you need to obtain a mortgage pre-qualification from a lending institution. Unless, of course, you are fortunate enough to have cash to pay for your home. You do not have to decide on your lender at this point. Mortgage pre-qualifications typically come with no strings attached. The pre-qualification gives Sellers some assurance that you are a serious prospective buyer when you decide to place an offer. It's always best to pre-qualify for a mortgage before starting your home shopping. You'll know exactly how much a financial institution would be willing to lend you.