Ten Steps to Home Ownership
Ten Steps to the Home Buying Process.
Step 1: Are You Ready?
One of the keys to making the home-buying process easier and more understandable is planning. In doing so, you'll be able to anticipate requests from lenders, lawyers, and a host of other professionals. Furthermore, planning will help you discover valuable shortcuts in the home-buying process making it LESS stressful and MORE enjoyable.
Do You Know What You Want?
Whether you are a first-time home buyer or entering the
marketplace as a repeat buyer, you need to ask why you want to buy. Are
you planning to move to a new community due to a lifestyle change or is
buying an option and not a requirement? What would you like in terms of
real estate that you do not now have? Do you have a purchasing
timeframe?
Whatever your answers, the
more you know about the real estate marketplace, the more likely you
are to effectively define your goals. Your Delco Realty agent can help you with these and other questions as you prepare to embark on your home search.
Do You Have The Money?
Homes and financing are closely intertwined. (Financing is the
difference between the purchase price and the down payment, commonly
referred to as debt or the mortgage.) The good news is that over the
years new and innovative loan programs have evolved which require a 5
percent down payment or less. In fact, a number of programs now allow
purchasers to buy real estate with nothing down.
In addition to a down
payment, purchasers also need cash for closing costs (the final costs
associated with closing the loan). Several newly emerging loan programs
not only allow the purchase of a home with no money down, but also
underwrite closing costs.
Not everyone, however,
elects to purchase with little or no money down. Less money down means
higher monthly mortgage payments, so most home buyers choose to buy
with some cash up front.
As to closing costs, in
markets where buyers have leverage, it may be possible to negotiate an
offer for a home that requires the owner to pay some or all of your
settlement expenses. Speak with local REALTORS® for details.
Is Your Financial House in Order?
Those great loans with little or nothing down are not available to
everyone: You need good credit. For at least one year prior to
purchasing a home, you should assure that every credit card bill, rent
check, car payment and other debt is paid in full and on time. Let your Delco Realty agent connect you with credit/lending specialists to ensure your credit situation is evaluated properly. Maximizing your credit score can save you literally thousands of dollars on your next home purchase.
Step 2: Get a Realtor®
More than 2 million people
in the United States have earned real estate licenses. However, real
estate is a tough business with a steep dropout rate, and the result is
that only a small percentage of those with licenses actively help
buyers and sellers. It is extremely important you pick a Realtor® that has experience.
The National Association of
REALTORS® (NAR) includes 1 million brokers and salespeople, individuals
bound together with a strong Code of Ethics, extensive training
opportunities, and a wealth of community information. NAR members are
routinely active in PTAs, local government committees and a variety of
neighborhood organizations. Being actively involved in community
affairs provides REALTORS® with a better understanding of the area in
which they are selling.
Delco Realty Group has been serving Upstate (Greenville and Spartanburg) South Carolina area for over 30 years!
Why?
Buying and selling real estate is a complex matter. At first it might
seem that by checking local picture books or online sites you could
quickly find the right home at the right price. But a basic rule in real
estate is that all properties are unique. No two properties -- even two
identical models on the same street -- are precisely and exactly alike.
Homes differ and so do contract terms, financing options, inspection
requirements and closing costs. Also, no two transactions are alike. In this maze of forms,
financing, inspections, marketing, pricing and negotiating, it makes
sense to work with professionals who know the community and much more.
Those professionals are the local REALTORS® who serve your area.
How do you choose?
In every community you're likely to find a number of realty brokerages.
Because there is heated competition, local REALTORS® must fight hard to
succeed in your community.
The best place to find a
local REALTOR® is from REALTOR.com's® extensive listing of community
professionals and properties. Other sources include open houses, local
advertising, Web sites, referrals from other REALTORS®, recommendations
from neighbors and suggestions from lenders, attorneys, financial
planners and CPAs. The experiences and recommendations of past clients
can be invaluable.
In many cases buyers will
interview several REALTORS® before selecting one professional with whom
to work. These interviews represent a good opportunity to consider such
issues as training, experience, representation and professional
certifications.
Step 3: Get Loan Pre-Approval
Few people can buy a home
for cash. According to the National Association of REALTORS® (NAR),
nearly nine out of 10 buyers finance their purchase, which means that
virtually all buyers -- especially first-time purchasers -- required a
loan.
The real issue with real
estate financing is not getting a loan (virtually anyone willing to pay
lofty interest rates can find a mortgage). Instead, the idea is to get
the loan that's right for you -- the mortgage with the lowest cost and
best terms.
Del-co Realty routinely suggest
that consumers start the mortgage process well before bidding on a
home. We can help suggest lenders to you. By meeting with
lenders -- either online or face to face -- and looking at loan
options, you will find which programs best meet your needs and how much
you can afford.
We also recommend pre
approvals for another reason: Purchase forms often require buyers to
apply for financing within a given time period, in many cases, seven to
10 days. By meeting with loan officers in advance and identifying
mortgage programs, it won't be necessary to quickly find a lender,
check credit, and rush into a financing decision that may not be the
best option.
What is "Pre-Approval?"
"Pre-approval" means you have met with a loan officer, your credit
files have been reviewed and the loan officer believes you can readily
qualify for a given loan amount with one or more specific mortgage
programs. Based on this information, the lender will provide a pre
approval letter, which shows your borrowing power. You can visit as
many lenders as you like and get several pre-approvals, but keep in
mind that each one carries with it a new credit check, which will show
up on future credit reports. Again, let your Del-co Realty agent help you through this process so you don't make any mistakes that can affect your credit.
Although not a final loan
commitment, the pre-approval letter can be shown to listing brokers
when bidding on a home. It demonstrates your financial strength and
shows that you have the ability to go through with a purchase. This
information is important to owners since they do not want to accept an
offer that is likely to fail because financing cannot be obtained.
How do you get pre-approval?
Real estate financing is available from numerous sources. Depending on your needs, we may
suggest one or more lenders with a history of offering competitive
programs and delivering promised rates and terms.
The loan officer will
carefully review your financial situation, including your credit report
and other information. The lender will then suggest programs which
most-closely meet your needs. For instance, a first-time buyer may
qualify for state-backed mortgage programs with little money down and
low interest rates, while a repeat purchaser (someone who has bought a
home before) with more equity (money invested in the home) might want
to get a 15-year loan and the lower overall interest costs it
represents. Typically, first-time buyers opt for the traditional
30-year loan, with either a floating interest rate or a fixed rate of
interest over the life of the loan.
Step 4: Look at Homes
Millions of new and existing
homes are sold each year. There's no shortage of housing options, but
with so many choices the challenge becomes finding the property which
best meets your needs.
The housing market is
complicated because the stock of homes for sale is always in flux. However, with the state-of-the-art MLS feed (known as IDX) available here on the Del-Co Realty website, you can create a profile and save home searches based on YOUR criteria. As new homes are listed, your saved search on our website will AUTOMATICALLY email you! So create a profile and start your home search right now!
What are you looking for?
A home is more than just a collection of bedrooms and bathrooms. Several properties -- each with four bedrooms, three baths, and the same price -- may well represent radically different designs, commuting distances, lot sizes, tax costs, interior dimensions, and exterior finishes. Additionally, you may be looking to reside in a certain area or have the home be within a certain school district or neighborhood. All these things (and more) can be considered in your home search using Del-co's state-of-the-art home search engine.
Each of us is different and
so it's important to list the features and benefits you want in a home.
Consider such things as pricing, location, size, amenities (extras such
as a pool or extra-large kitchen) and design (one floor or two,
colonial or modern, etc.).
Next, it's important to
consider your priorities. If you can't get a home at your price with
all the features you want, then what features are most important? For
instance, would you trade fewer bedrooms for a larger kitchen? A longer
commute for a bigger lot and lower cost?
Lastly, consider your needs
in several years. If you'll need a larger home, maybe now is the time
to buy a bigger house rather than moving or expanding in the future. If
you expect your income to increase, perhaps you should consider a more
expensive home financed with a loan program where monthly payments
increase in the future.
Where should you look?
All neighborhoods and communities have a special nature that gives them identity and value. One community may be well known for historic homes while another offers both suburban living as well as easy access to downtown office areas. Start your home searchwith Del-co today! There is no obligation. Our powerful search engine is free!
How do you find a house?
Some buyers like to search REALTOR.com® by looking at listings on the
basis of location or price; others prefer to have a local REALTOR®
suggest properties; and many buyers prefer both approaches.
Regardless of your choice,
it's important to target your search. By using basic measures such as
general location and affordability, you can refine your search and
focus on homes that offer the most desirable features.
Step 5: Choose a Home
There's no doubt that choosing a home is a big decision and you want to do it right.
As a buyer, here's what
actually happens. A home has been placed on the market for which the
seller has established an asking price as well as other terms. In
effect, this is an offer. At this point, you have three choices: accept
the seller's offer and create a contract; reject it and not make an
offer; or suggest different terms and make a counter-offer. If you
choose this last option, the seller may accept, reject or make a
counter-offer.
No aspect of the home buying
process is more complex, personal or variable than bargaining between
buyers and sellers. This is the point where the value of an experienced
REALTOR® is clearly evident because he or she knows the community, has
seen numerous homes for sale, knows local values and has spent years
negotiating real estate transactions.
Is it THE house?
A house is shelter, but a home is far more. It's where you live, relax,
entertain friends, raise families, and work. A home is where you spend
much of your life, and so choosing a house is an enormous decision.
How do you know if a house
is THE one? Probably the best approach is to look at as many homes as
possible, something made easy by using your Del-co Realty agent along with our home search tool.
Can you really afford it?
Remember Step 2 - the pre-approval process? Getting pre-approved means you have a very good idea of how much you can borrow, what loan programs will most likely work best in your situation and how much home you can afford.How reliable is a
pre-approval? While pre-approval is not a loan commitment, it's still
necessary for lenders to check such items as appraisals and the latest
credit reports. Despite fluctuating interest rates, pre-approval
nonetheless provides a reasoned, careful analysis of what you can
afford. After all, loan officers are routinely paid only when loans are
originated. It doesn't make much sense for loan officers to suggest
high loan limits that later can't be delivered.
Step 6: Get Funding
Often the cost of real
estate financing is routinely greater than the original purchase price
of a home (after including interest and closing costs). Because
financing is so important, buyers should have as much information as
possible regarding mortgage options and costs.
What kind of loan?
There are thousands of loans available out there from a variety of lenders, but in general, the mortgage you choose will likely be determined by at least several key factors:
- How much down? Loans with 5 percent down or less are available -- in fact, loans from major lenders with no money down have appeared in recent years.
- If you place less than 20 percent down, lenders will want the mortgage guaranteed by an outside third party such as the Veterans Administration (VA), the Federal Housing Administration (FHA) or a private mortgage insurer (PMI, or private mortgage insurance, is required by lender to protect against any mortgage defaults). Millions of VA, FHA and PMI loans are generated each year.
- How's your credit? The best rates and terms are only available to those with solid credit. To get the best loans, make a point of paying credit cards, installment payments, rent and mortgage bills in full and on time.
- Are you a first-time buyer? It might seem that "first-time buyer" means someone who has never owned property before, but under most state programs, the term refers to those who have not owned property within the past three years. State-backed first-timer programs often feature smaller downpayments and below-market interest rates. For details, ask your Del-co Realty agent.
How do you get a loan?
To obtain a loan you must complete a written loan application and provide supporting documentation. Specific documents include recent pay stubs, rental checks, and tax returns for the past two or three years if you are self-employed. During the prequalification procedure, the loan officer will describe the type of paperwork required.
Where do you get a loan?
Mortgage financing can be obtained from mortgage bankers,
mortgage brokers, savings and loan associations, mutual savings banks,
commercial banks, credit unions, and insurance companies. Again, if you don't know anyone in the business, let your Del-co Realty agent help connect you with friendly, professional experts in the lending business.
Step 7: Make an Offer
REALTOR® groups, working
with legal counsel, have developed forms that are appropriate for
realty transactions in specific communities. Such documents include
numerous sale conditions and their wording should be carefully reviewed
to assure that they reflect the terms you want to offer. Your Del-co REALTOR® can
explain the general contracting process in your community as well as
his or her role.
While much attention is
spent on offering prices, a proposal to buy includes both the price and
terms. In some cases, terms can represent thousands of dollars in
additional value for buyers -- or additional costs. Terms are extremely
important and should be carefully reviewed. Let your experienced Del-co Realty agent help you with this!
How Much?
You sometimes hear that the amount of your offer should be x
percent below the seller's asking price or y percent less than you're
really willing to pay. In practice, the offer depends on the basic laws
of supply and demand: If many buyers are competing for homes, then
sellers will likely get full-price offers and sometimes even more. If
demand is weak, then offers below the asking price may be in order.
How do you make an offer?
The process of making offers varies around the country. In a typical
situation, you will complete an offer, then your Del-co REALTOR® will present it to the owner or owner's agent/representative (also known as the listing agent). The owner, in turn, may
accept the offer, reject it or make a counter-offer.
Because counter-offers are
common (any change in an offer can be considered a "counter-offer"),
it's important for buyers to remain in close contact with their Del-co REALTOR®
during the negotiation process so that any proposed changes can be
quickly reviewed. Timing during the offer phase can make or break a deal. Your Del-co agent will be available for you every step of they way.
How many inspections?
A number of inspections are common in residential real estate transactions.
They include checks for termites, surveys to determine boundaries,
appraisals to determine value for lenders, title reviews and structural
inspections.
Structural inspections (also commonly known simply as a "home inspection") are
particularly important. During these examinations, an inspector comes
to the property to determine if there are material physical defects and
whether expensive repairs and replacements are likely to be required in
the next few years. Such inspections for a single-family home often
require two or three hours, and buyers should attend. This is an
opportunity to examine the property's mechanics and structure, ask
questions and learn far more about the property than is possible with
an informal walk-through. Your Del-co Realty agent can help recommend a home inspector to you.
Step 8: Get Insurance
No one would drive a car without insurance, so it figures that no homeowner should be without insurance.
The essential idea behind
various forms of real estate insurance is to protect owners in the
event of catastrophe. If something goes wrong, insurance can be the
bargain of a lifetime.
What kind and how much?
There are various forms of insurance associated with home ownership, including these major types:- Homeowners' insurance: Homeowner's insurance provides fire, theft and liability coverage. Homeowners' policies are required by lenders and often cover a surprising number of items, including in some cases such property as wedding rings, furniture and home office equipment.
- Flood insurance: Generally required in high-risk flood-prone areas, this insurance is issued by the federal government and provides as much as $250,000 in coverage for a single-family home plus $100,000 for contents. Your Del-co REALTOR® can explain which locations require such coverage.
- Home warranties: With new homes, buyers want assurance that if something goes wrong after completion the builder will be there to make repairs. But what if the builder refuses to do the work or goes out of business? Home warranties bought from third parties by home builders are generally designed to provide several forms of protection: workmanship for the first year, mechanical problems such as plumbing and wiring for the first two years, and structural defects for up to 10 years. Home warranties for existing homes are typically one-year service agreements purchased by sellers. In the event of a covered defect or breakdown, the warranty firm will step in and make the repair or cover its cost.
Insurance policies and
warranties have limitations and individual programs have different
levels of coverage, deductibles and costs. For details, speak with
your Del-co REALTOR®, insurance broker, or home builders (if new construction).
Where to look
Ask your Del-co REALTOR® where you can purchase insurance policies. We have relationships with many professionals that can help you.
How do you get insurance?
The time to obtain insurance and warranty coverage is at closing, so
have a conversation with your Del-co REALTOR® or insurance broker prior to closing. Be sure to
ask about limitations, costs, deductibles and "endorsements"
(additional forms of coverage that may be available).
Step 9: Closing
Go to any local courthouse
and you can find property records detailing real estate ownership in
your community -- sometimes records that date back hundreds of years.
These records are important
because they provide today's owners with proof that they have good,
marketable and insurable title to the property they are selling.
Equally important, such records enable buyers to provide proof of
ownership when they sell.
The closing process, which
in different parts of the country is also known as "settlement" or
"escrow," is increasingly computerized and automated. In many cases,
buyers and sellers don't need to attend a specific event; signed
paperwork can be sent to the closing agent via overnight delivery.
Step 10: What's Next?
You've done it! You've
looked at properties, made an offer, obtained financing and gone to
closing. The home is yours. Is there any more to the home buying
process?
Whether you're a first-time buyer or a repeat buyer, there are several more steps you'll want to take.
Those papers you received at
settlement are extremely valuable, so hold on to them! In the
short-term they can help establish tax deductions for the year in which
the property was purchased. In the future, such papers will be
important for tax purposes when the property is sold, and in some
cases, for calculating estate taxes.
Also at closing, your Del-co agent will provide you with a list of the utilities (and contact information) required by the home - items such as water,
sewage, gas, electric, and oil service. You want utility bills to be
paid in full by owners as of closing and you also want services
transferred to your name for billing. Usually such transfers can be
done without turning off utilities.
About two weeks after
closing, contact your local property records office and confirm that
your deed has been officially recorded. Such records are public notices
that show your interest in the property.
Moving in
It is generally understood that sellers will leave homes "broom clean"
when moving out. This expression does not mean "vacuumed" or
"spotless." Broom clean makes sense because it means the house is ready
to be painted and cleaned.
Your home, your money
For most owners a home is the largest single asset they hold, so it makes sense to protect that asset.Many owners make a photo or
video record of the home and their possessions for insurance purposes
and then keep the records in a safety deposit box. Your insurance
provider can recommend what to photograph and how to secure it.
You want to maintain fire,
theft and liability insurance. As the value of your property increases
such coverage should also rise. Again, speak with your insurance
professional for details.
"Ten Steps to Home Ownership" ©REALTOR.org