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Buying a Home? Here's How the Process Works
Get Pre-Approved for your mortgage! It's smart to ask your lender to pre-approve, rather than pre-qualify, you for a mortgage. Pre-qualification only tells how much you can afford. Pre-approval goes a step further. Your lender will thoroughly evaluate your application-including verifying employment information and financial disposition-then clear you for a loan of a determined amount. Having your loan pre-approved gives you a sizeable advantage: Your new status as a cash buyer makes you more attractive to the seller.
Once you learn how much of a home you can afford, stay within your budget. Just because you've been approved for a certain amount, doesn't mean you'll feel comfortable with monthly payments at the high end of the range. Ask yourself if you can live with these payments. Do they fit your established budget? If not, rethink your spending limit. Your new home should give you great pleasure, not hold you hostage.
When you relay your price range to a real estate agent, ask to view properties within that range only. By restricting yourself, you'll avoid disappointment later on.
Hire a Buyers Agent. A buyer’s agent will sit down with you and discuss your needs in a new home. The buyer’s agent will consult with you to determine what amenities you want, the location or neighborhood you want to live in and how long you should expect the process to take. A good buyer’s agent will also go over an Offer to Purchase Contract with you so you will understand the terms that are in the contract.
Agency. Your buyer’s agent will go over the agency options under state law. In the state of Kentucky an agent is allowed to represent both the seller and the buyer in the same transaction. This is called “Limited Dual Agency”. This practice can never been done without written consent from both parties.
If you feel you need full representation do not allow your agent to do “Limited Dual Agency”. When you hire me you do not have to worry about this, as I never perform “Limited Dual Agency”. I only represent you!
The Home Search. You and your agent will preview homes on the Multiple Listing Service that meet your criteria. You will decide which homes you would like to preview and then your agent will schedule appointments to view the homes with you. While you are visiting homes your agent will advise you on the pros and cons on each home. It is best if you take notes. After a few homes you will start to forget specifics about each home.
Making the Offer. Now you have decided on the right home it is time to make an offer. Your agent will do a Market Analysis on the home you have picked which will give you the selling history of the area and like type homes. This information will reveal if the home is overpriced, under priced or at market. With this information you will be able to determine the price and terms to offer to the seller. Your agent should present your offer to the seller and their agent in person to make sure that all of the important issues are explained in detail. After the offer is presented, the seller will have the option of accepting it, rejecting or making a counter offer. A counter offer is done when the seller makes any changes to the offer and sends back to you and your agent. You will then have the option of accepting it, rejecting or making a counter offer back to the seller.
Earnest Money. When you make the offer you will be required to put up “Good Faith Money” This lets the seller know you are a serious buyer. The amount of earnest money deposit varies based on the type of property being purchased and local market conditions. Buyers offering a larger-than-customary amount of "earnest money" may get a seller's attention. By committing more money up front, buyers demonstrate greater sincerity and motivation to close the transaction. Your real estate professional can guide you as to the appropriate sum for your specific transaction.
This money is protected under the terms of the contract and by state laws and is refundable if a contingency in the contract cannot be fulfilled. The only way you will should lose this money is if you where to walk away from the transaction with out good cause.
Lock in Your Interest Rate. With an accepted contract your lender can now lock in you interest rate. If rates where to go up, you will be protected. There is usually a length of time that a lender will honor the lock in depending on the type of financing you are getting. Be sure you know what this deadline is so you will know what date to negotiate for closing with the seller.
Home Inspections. Now that you have an accepted contract, it is time to have the home inspected by a competent licensed home inspector. After the inspection you should get a detailed report noting any problems the house may have. Then you and your agent will go over these in detail to determine if there are any items you may want the seller to repair. If there are any items you ask to be repaired, and the seller refuses to do the repair, then you will have the right to back out of the purchase with out any penalty.
Appraisal. Your lender will require an independent appraisal on the property you are purchasing to insure that its value is the same or more than the contract price. If the appraisal value is less, then your buyer’s agent will try to get the seller’s to lower the price. If this cannot be negotiated then you can void the contract and receive a refund of your Earnest Money.
Home Insurance. Time to start shopping for home owners insurance. You will be required to purchase 1 year of home owners insurance effective at the time of closing or settlement.
Utilities. About a week or two before closing you will need to get the utilities scheduled to be placed into your name as of the day of closing. Your buyer's agent can assist you with contact numbers.
Closing. At closing the closing agent or attorney will go over the closing statement with you. This form is also called a HUD1. It will detail your total cost to purchase the house and any fees that the seller’s maybe paying on your behalf. You will also sign papers that the lender will require to secure the mortgage and the new deed with your name to be recorded at the county clerk’s office.
The last thing is you will receive the keys to your new home and you can start moving in.
Hot Tip! During the buying process do not use your credit cards to excess or buy any large ticket items on credit such as a car, furniture, etc. Account for any unusual deposits by making copies of the check and deposit slip. The lender you use will run a final credit report just before closing to make sure that you have not changed your debt ratio by borrowing money. Increasing your debt before closing could keep you from getting the mortgage to buy your new home.
If you have any questions or would like to set an appointment to meet with me please fill out the form below and click send.
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