The home buying process can seem overwhelming. There are so many decisions to make, legal things to consider, and so much money on the line! Where do you start? How long will it take? We’ll do our best to answer those and other possible questions, and give you some helpful hints.

Set a budget

It’s wise to set a monthly, and even yearly, budget at the start of your home buying process. Know in advance how much you can afford, and take into consideration the cost of repairs and maintenance, and taxes.

Get pre-approved

Before you meet with a mortgage lender, be sure you know your credit score. Take the time to get your credit report. This way, you can ensure that it’s accurate, or take care of any inaccuracies so they don’t cause trouble when you try to get a mortgage.

Once you have your credit report, meet with a mortgage lender and get pre-approved for a loan. You can simply get pre-qualified if you prefer, but pre-approval will benefit you greatly when you start making offers on houses. A pre-approval is more appealing to a seller because it means your credit score, debt structure, and income have already been taken into consideration and all that’s left for you to do is sign the papers. Pre-approval also gives you a much clearer sense of how much home you can afford.

Don’t let a mortgage rep talk you into getting a bigger loan than you’re comfortable with. Most people are approved for mortgage loans that completely max out their budget, leaving no room for emergencies or other unexpected situations. That’s how so many people get into financial trouble and why so many homes are foreclosed. When getting a home loan, it’s wise to go one step beyond “living within your means” and actually live a little below your means. Then, if something unexpected does happen (as it inevitably will), or if you or your spouse change or loose a job, you’ll be in a more stable financial position.

Make a “need” list and a “wish” list

Know in advance what features and amenities you have to have, and which ones you can live without. This is where you have to take a step back and be objective, which can be hard! You may want an in-ground pool, but do you need it?

Being able to separate your wants from your needs will be very helpful when you start looking at houses. It’s easier than you think to walk into a home, fall in love with it, and convince yourself that you really do need those expensive stainless steel appliances. It’s especially easy if you walk into the home without pre-determined “wants” and “needs”.

Take the time to make a list. It’s worth it. After you make the list, use it to create a kind of scorecard or check list. Make several copies of your check list, and use one each time you look at another house. One of the risks of house-hunting is that after a while all the houses start to blend together. You can’t remember which houses had what features. A check list or scorecard for each house will help you keep it all straight, and enable you to do a real “apples to apples” comparison.

Find a Realtor

Though you may be tempted to go it alone when buying a house, it truly is in your best interest to work with a real estate agent. An experienced, professional agent will know his or her way around the market. He or she will know the process, and the paperwork (which can be considerable). In addition, a real estate agent can be your advocate if you end up either in a bidding war for a house, or you need to negotiate with a seller.

There’s a lot of “legalese” involved with buying a house, and it can be confusing, especially for a first-time buyer. You have rights and obligations that you may not be aware of. An experienced real estate agent will know about those things, and will be able to help you navigate through some of the more confusing legal jargon.

Finding an experienced agent can be difficult unless you already know someone. The best way to find a Realtor is to get referrals. Talk to friends and family who have bought homes, and ask them for recommendations. Get more than one referral. It’s wise to talk to two or three agents before deciding which one to work with. Not only do you want to be sure of his or her experience and level of professionalism, but you want to work with someone whose personality fits well with your own.

Look for an agent who is professional, experienced, familiar with areas you’re interested in, comes highly recommended, and is willing to dedicate him- or herself to helping you find a home that fits your needs.

Don’t be afraid to ask Realtors questions. Remember, a house is a major purchase, probably the largest purchase you’ll ever make. Be sure the person you’re working with is someone with whom you’re comfortable, someone who doesn’t mind answering questions – because you’ll have a lot of them along the way.

Here are some questions to consider asking:

* How long have you been a Real Estate agent?
* Do you work full or part time?
* Are you currently working with other buyers?

When you find the agent you want to work with, you’ll likely be asked to sign a “Buyer’s Agreement”. Don’t let this surprise or intimidate you. It’s common practice in the real estate industry, and it works to your benefit. By signing a Buyer’s Agreement, you and the agent are committing to work together for a specific period of time (typically 3 – 6 months). A Buyer’s Agreement also details the agent’s responsibilities, his or her commission, and who’s going to pay the commission. By signing a Buyer’s Agreement, the real estate agent now has what are called “Fiduciary Responsibilities” to you. This means that he or she must act in your best interests when helping you find and purchase a home. He or she must act in a manner that is trustworthy, and must not represent any client that creates a conflict of interests. While you probably expect your agent to be trustworthy and honest with or without a Buyer’s Agreement, it’s still nice to get it in writing!

How does the process work?

Once you’ve got your pre-approval, your check list, and your agent, it’s time to start looking at homes! If you’re lucky, you’ll find something right away. Often, though, it takes time to find the right house. Be patient, and be willing to take your time.

When you find a house you like, you’ll need to make an offer. Spend a fair amount of time talking this through with your real estate agent. One of the challenging realities of the real estate industry is that there’s no set price for anything. House values vary by market, and even (in some cases) by season.

Compare the home you’re interested in with similar homes; homes that have similar amenities, square footage, and are roughly the same age and condition. It will help you get a good idea of the fair market value for the home you want to purchase. Ask your agent to develop a Comparable Market Analysis for other houses in the area.

When you’ve determined the dollar amount you want to offer for a house, your agent will draw up a Sales Contract. Don’t let this scare you. Again, it’s a necessary part of the process, and your agent will talk you through it. Keep in mind, though, that this is a legally binding contract, so don’t make an offer on a house unless you’re sure it’s one you want. Because if you’re offer is accepted, you’re legally bound to follow through and purchase the home. The un-scary part is that the Seller is legally bound as well, and can’t withdraw the home for any reason unless you agree.

Here’s some of the information that included in a Sales Contract:

• Street address and legal description of the property
• Selling price
• Earnest Money Deposit (many Sellers will ask for at least a “good faith” deposit as evidence that you’re serious about purchasing the house)
• A list of inclusions and exclusions: this outlines specifics of what is and is not included with the sale of the house (appliances, for example, are often include and will be listed in this section)
• Warranties: some Sellers offer a Home Warranty for up to 12 months, after the home has been sold.
• Home Inspection Contingency: the house must be inspected by a licensed professional. This section specifies how quickly that must happen.
• Property Disclosures
• Acceptance: how long the Sellers have to respond to your offer

Most Sales Contracts contain additional information as well, about things like Insurance and Arbitration, but the above list covers the basics. Once the Sales Contract has been filled out and signed, your agent will submit it to the Sellers Agent for consideration.

At this point, the Seller has the option of accepting your offer, rejecting it, or submitting a counter-offer. It’s anybody’s guess as to how a Seller will respond. You may be asked to negotiate the selling price, the earnest money deposit, or even the list of inclusions. If more than one buyer in interested in the house, you could find yourself in a bidding war. If that happens, you need to immediately determine how much you’re willing to pay for the house. Bidding wars can get emotional, and sometimes people get caught up in the moment, or in the idea of winning, and end up spending more than they can afford or worse, more that the house is actually worth!

Eventually, you’ll make an offer that’s accepted by a Seller, and the next phase of the process begins.

If you’ve been pre-approved for a mortgage, securing the loan should be a relatively quick process. Not necessarily simple, because it will involve a lot of paperwork, but it shouldn’t take long. As soon as you know your offer has been accepted, call your mortgage rep and begin the process of securing your home loan.

When securing a mortgage, you’ll be required to provide homeowners insurance. You won’t need this to get the loan, but you will have to have it before you can officially close on the house. If your house in located in a flood plane, you’ll be required to secure flood insurance as well, which is typically a separate policy.

You’ll also want to arrange for a home inspection. Some buyers opt to skip this step, preferring instead to save a little money. However, a home inspection safeguards you against buying a house with some unseen, potentially expensive, problem. Most Sales Contracts include a Home Inspection Contingency that states the home must either pass inspection, or be repaired by the Seller until it passes inspection. The focus of a home inspection is not cosmetic, but material and foundational. A home inspector will look at things like the electrical system, the foundation, and the overall structure of the home. He will also inspect the water tank, air conditioner/heater, and any appliances that are staying with the house. Though a home inspection is an added expense, you’ll rest easier knowing you’re purchasing a house that structurally and materially sound.

At this point, there’s not much left to do but close on your home. At “closing”, the title to the house will be put in your name, and you’ll usually receive the keys. The closing may take place at a Title Company, Mortgage Company, or at the office of either the Buyers or Sellers agent. Prior to your closing, your agent should give you a “Closing Cost Estimate”. This outlines the costs that will be involved in closing on your home, and gives you a reasonable estimate of the funds you will need at closing. You should also have a copy of the Settlement Statement before the day of your closing. The Settlement Statement is basically a snapshot of the dollars and cents of the closing. It will list your Earnest Money Deposit, any tax adjustments that have been made, your mortgage amount, and the total cash due to and from the Seller and Buyer.

You will see several forms and documents at your closing, many of which will require your signature. Though specifics vary from region, here are some of the basics:

• The Sales Contract
• The Settlement Statement
• Title Insurance
• Loan Papers
• Title or Deed

Once all the papers are signed – congratulations! You’re a homeowner! All that’s left is to move in to your new place and start decorating!

The process of buying a home can be intimidating, and sometimes lengthy, but hopefully we’ve broken down enough to give clarity to the process and to ease some of your concerns or fears. If you have other questions, let us know. We’ll do our best to answer them for you. And if you’re ready to begin the home buying process, we’d be honored to work with you and help you purchase your first home!

Closing

Closing the real estate transaction is basically the investigation made or actions taken by either a title agent or title attorney before the actual issuance of the title policy. There are six basic steps that usually follow in somewhat the same order in every real estate transaction. Although it’s not the job of the title agent or title attorney to cure defects in or problems with the title to the property or perform escrow or other services outside of closing the transaction, title agents and title attorney help in these matters on a somewhat regular basis.

WHY BUY TITLE INSURANCE?

Protecting Your Home Investment
A home is usually the largest single investment any of us will ever make. When you purchase a home, you will purchase several types of insurance coverage to protect your home and personal property. Homeowner’s insurance protects against loss from fire, theft or wind damage. Flood insurance protects against rising water. And a unique coverage known as title insurance protects against hidden title hazards that may threaten your financial investment in your home.

Protecting Your Largest Single Investment

Title insurance is not as well understood as other types of home insurance, but it is just as important. When purchasing a home, instead of purchasing the actual building or land, you are really purchasing the title to the property — the right to occupy and use the space. That title may be limited by rights and claims asserted by others, which may limit your use and enjoyment of the property and even bring financial loss. Title insurance protects against these types of title hazards.
Other types of insurance that protect your home focus on possible future events and charge an annual premium. Title insurance protects against loss from hazards and defects that already exist in the title, and it is purchased with a one-time premium.

Two Kinds of Title Insurance Benefit You in Two Ways

There are two basic kinds of title insurance: Lender or mortgagee protection, and owner’s coverage.
Most lenders require mortgagee title insurance as security for their investment in real estate, just as they may call for fire insurance and other types of coverage as investor protection. When title insurance is provided, lenders are willing to make mortgage money available in distant locales where they know little about the market.
Owner’s title insurance lasts as long as you, the policyholder — or your heirs — has an interest in the insured property. This may even be after you have sold the property.
Depending on local practices and state law where the property is located, you may pay an additional premium for an owner’s policy, or you may pay a simultaneous issue charge (usually a smaller amount) for the separate lender coverage. You may even split settlement costs with the seller for the lender or owner’s policy.

What Does Your Premium Really Pay For?

An important part of title insurance is its emphasis on risk elimination before insuring. This gives you, as the policyholder, the best possible chance for avoiding title claim and loss.
Title insuring begins with a search of public land records affecting the real estate concerned. An examination is conducted by the title agent or attorney on behalf of its underwriter to determine whether the property is insurable. The examination of evidence from a search is intended to fully report all “material objections” to the title. Frequently, documents that don’t clearly transfer title are found in the “chain,” or history, that is assembled from the records in a search. Here are some examples of documents that can present concerns:

• Deeds, wills and trusts that contain improper wording or incorrect names
• Outstanding mortgages and judgments, or a lien against the property because the seller has not paid his taxes
• Easements that allow construction of a road or utility line
• Pending legal action against the property that could affect a purchaser, or incorrect notary acknowledgements

Through the search and the examination, title problems are disclosed so they can be corrected whenever possible. However, even the most careful preventative work cannot locate all hidden title hazards.

Hidden Title Hazards – Your Last Defense

Despite all the expertise and dedication that go into a title search and examination, hidden hazards can emerge after closing, resulting in unpleasant and costly surprises. Some examples of hazards include:

• A forged signature on the deed, which would mean no transfer of ownership to you
• An unknown heir of a previous owner who is claiming ownership of the property
• Instruments executed under an expired or a fabricated power of attorney
• Mistakes in the public records

Title insurance offers financial protection against these and other covered title hazards. The title insurer will pay for defending against an attack on title as insured, and will either perfect the title or pay valid claims. All for a one-time charge at closing.
Your home is your most important investment. Before you go to closing, ask about your title insurance protection, and be sure to protect your home with an owner’s title insurance policy.
Immigration restrictions

By acquiring real estate in a particular country, one does not usually also acquire the right to reside there. While many countries place no restrictions on foreigners who want to buy real estate, immigration restrictions do apply. So even if you own a house in Florida, for example, you would not necessarily be guaranteed access to the United States. Indeed, it could even be deemed, in conjunction with other factors, that you had immigrant intent and you could be denied entry to the United States on such grounds at a future visit. Citizens of certain countries may also face strict visa requirements and consequently suffer restricted travel opportunities and flexibility due to political circumstances. But nationals of Western European countries — the United States, Canada or Japan, for example, whose passports usually allow them easy access to many countries — also can suddenly find it impossible to obtain visas due to temporary travel restrictions applied during periods of trade sanctions or other economic or political disturbances.
Foreigners often can get a 30-year mortgage (home loan) to purchase properties. The only requirement is an approximately 30-40% down payment. The whole process is very easy and fast. Foreign buyers don’t need proof of employment, credit or Social Security number.

Source: Stewart Title company